INSUBCONTINENT EXCLUSIVE:
The reverse repo rate stayed at 6.25 per cent.The Reserve Bank of India held its policy rate unchanged, surprising most analysts who had
expected a rate increase to combat inflationary pressures arising from high oil prices and a weakening rupee.The monetary policy committee
kept the repo rate unchanged at 6.50 percent on Friday, in sharp contrast to expectations of a hike by 35 of 64 analysts in a Reuters poll
last week.The panel shifted its policy stance to "calibrated tightening" from "neutral"
Five of the six panel members voted to leave the rate unchanged.The reverse repo rate stayed at 6.25 percent.CommentaryMAHESH SINGHI,
FOUNDER MD, SINGHI ADVISORS, MUMBAI"It's quite an unexpected decision by the monetary policy committee to keep the repo rate unchanged at
Having said that, the tightening of stance is obviously a well-thought-out decision
However, it indicates that more rate hikes are in the pipeline.""The RBI voting for a pause indicates that there is an attempt on its part
to address the domestic macroeconomic fundamentals to tackle headwinds in the global market."TIRTHANKAR PATNAIK, INDIA STRATEGIST, MIZUHO
BANK, MUMBAI"The key takeaway is that the MPC remains focused on inflation control
From the market's perspective, the expectation was that the RBI will do something for the INR depreciation as well
They have shown that inflation control remains their objective.""And if one looks at establishing macro stability, then by having
independent-focussed MPC on inflation control, the RBI has taken the right step
This is not saying they are not taking other steps beyond MPC in terms of arresting the INR depreciation
The policy told us these steps (like easing overseas borrowing norms for oil companies) now must be seen as separate from the mandate of the
MPC which remains inflation control.""Other takeaway is they are not complacent that is why the stance has changed from neutral to
They are saying there are ways in which the situation could become worse and they would not hesitate to retaliate if the situation
worsens."VK VIJAYAKUMAR, CHIEF INVESTMENT STRATEGIST, GEOJIT FINANCIAL SERVICES, KOCHI"The hold on policy rates has come against the market
expectation of a 25 bps rate hike
But the change in stance from neutral to 'calibrated tightening' is indicative of the likely tightening to come depending on evolving
data.""The RBI's surprising policy announcement is the consequence of its confidence on benign inflation, which in turn, stems from the
Since the Indian economy, like many other emerging markets, is presently in the cross-currents of global developments, the RBI is likely to
be on guard keeping a strict vigil on the US 10-year bond yield and crude prices."ABHIMANYU SOFAT, HEAD OF RESEARCH, IIFL SECURITIES LTD,
MUMBAI"This is a surprise
This may lead to a negative impact, especially on the currency market
With the US yield inching up to 3.25 percent, it was expected the RBI would increase the rates to protect against the inflation rise.""We
believe because of the policy one should continue to focus on export-oriented and import substitution stories from both the services and
The presumption of lower inflation due to lower food prices may be a bit in coherent, as core inflation may rise due to the depreciating
If crude prices continue to surge, then the RBI may have to come with front-loaded rate increases."KAPIL GUPTA, ECONOMIST EDELWEISS
SECURITIES LTD, MUMBAI"The RBI has changed its stance to calibrated tightening from neutral, which keeps the chance of a rate hike open
It depends on how the situation evolves on balance of payments and inflation, but the possibility of another rate hike remains.""A downside
risk to growth forecast is building, although not a major one, as global trade and industrial activity are slowing down, and due to domestic
liquidity tightening.., it will have an impact on segments of the economy."UPASNA BHARDWAJ, SENIOR ECONOMIST, KOTAK MAHINDRA BANK,
MUMBAI"This is a surprise given global financial markets have been very volatile and the way the rupee has moved, oil prices have risen and
the United States 10-year yield has also surged
Despite that, the RBI has probably chosen to stay on hold
But, given the upside risks to inflation due to the rupee and fuel prices, six- -to-nine months ahead, we do expect a rate hike of at least
25 basis points.""The excise duty cut on fuel is likely to have an impact of 10,500 crore rupees like the government said, but that can
We have to look at other sources of revenues which seem to be a little discomforting
At this point of time, the GST collection run rate is seemingly not up to the mark
this story has not been edited by TheIndianSubcontinent staff and is published from a syndicated feed.)
