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This article is more than 3 year old.

RBI Monetary Policy Review Highlights: October MPC keeps repo rate unchanged at 6.50%, rupee hits 74 per dollar mark

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The Reserve Bank of India on Friday kept its key policy interest rates unchanged surprising the market and experts despite growing macro-economic concerns. The RBI's Monetary Policy Committee also said that its decision is consistent with the regulator's approach to adopt a calibrated tightening. The RBI began its three-day six-member monetary policy meeting on Wednesday. The members have had a hawkish undertone in the August meet even as they decided to keep the stance neutral. Market watchers and top economists are expecting a 25 basis point hike in key interest rates as the RBI MPC will consider a sharp surge in crude prices, weak rupee, market turbulence amid liquidity crunch and on top of all, the US Federal Reserve raising interest rates. Here are the main highlights from the RBI's Monetary Policy Committee review meeting decision today:

RBI Monetary Policy Review Highlights: October MPC keeps repo rate unchanged at 6.50%, rupee hits 74 per dollar mark
  • RBI Monetary Policy: Repo, reverse repo rates unchanged at 6.50%, 6.25%##RBI Monetary Policy: Repo, reverse repo rates unchanged at 6.50%, 6.25%

    In a surprise move, the Reserve Bank of India kept the repo rate unchanged at 6.50 percent-   the rate at which it lends money to commercial banks. The reverse repo rate was also retained at 6.25 percent.

    "The decision was consistent with the stance of calibrated tightening of monetary policy in consonance with the objective of achieving the medium-term target for CPI inflation of 4 percent," RBI said in its policy statement on Thursday.

    The Monetary Policy Committee (MPC) voted 5:1 in favour of a status quo, with only Chetan Ghate voting for a 0.25 percent hike. Read more

  • Closely monitoring NBFC to avoid systemic risk, says RBI##Closely monitoring NBFC to avoid systemic risk, says RBI


    The Reserve Bank of India (RBI) on Friday said they are closely monitoring the nonbanking financial companies (NBFC) to avoid systemic risk and the regulatory system to monitor the sector remains robust. The government has stepped in timely to stem the crisis at IL&FS and RBI will engage with the new board if necessary to take further resolution steps, said the central bank governor, Urjit Patel, after the monetary policy meeting. Read more

  • 5 out of 6 Monetary Policy Committee members vote in the favour of 'Calibrated Tightening' stance##5 out of 6 Monetary Policy Committee members vote in the favour of 'Calibrated Tightening' stance

  • Here’s what experts have to say on RBI keeping policy rates unchanged##Here’s what experts have to say on RBI keeping policy rates unchanged

    Sajjid Chinoy, Chief India Economist, JPMorgan: 
    For the reasons you mentioned, it is a bit surprising, I think it comes down to, we have been saying for a long time that the framework should not change. The RBI should be basing monetary policy where inflation is going to be 2-3 quarters down the line. I guess where our estimates are little bit different is the risk to inflation is to the upside because we have seen this big move in oil prices and the currency, it is undoubtedly the case, food prices I mentioned just before the rate announcement have been unduly benign. But it comes down to where how you forecast inflation. We forecast inflation to be above 5.

    Taimur Baig, MD & Chief Economist, DBS Group Research:

    I will be blunt, I think it was a mistake. The whole world is going through a major recalibration in terms of monetary policy and India does not live in a vacuum. So the fact that the Fed is raising rates, the fact that emerging market economies are raising, it sort of puts the onus on the Reserve Bank of India (RBI) to also not being left out; that is issue number one. The second issue is given where demand and prices are right now and where the outlook is, it makes sense to remain on the hiking trend. The fact that the rupee has already sold off so much, it does not help the fact that they are taking a pause.

  • RBI deputy governor Viral Acharaya says that system liquidity remains in surplus mode##RBI deputy governor Viral Acharaya says that system liquidity remains in surplus mode

    Viral Acharya, RBI deputy governor said that system liquidity remain in surplus mode till March 2018. It has largely remained neutral in the first half of the year. Acharya also said that the RBI, SEBI and government closely monitoring money market conditions. We will continue to proactively manage the system liquidity to meet demand for reserve money growth, he added. We would urge financial firms to place greater reliance on long-term finance than short term paper.

  • RBI says FY20 GDP growth seen at 7.6%##RBI says FY20 GDP growth seen at 7.6%

  • Highlights from RBI governor Urjit Patel's press conference##Highlights from RBI governor Urjit Patel's press conference

    Headwinds from oil price rise amidst supply side disruptions.
    Risks emerging from US Fed tightening, escalating tariff wars, spillovers from portfolio rebalancing.
    Outlook overcast with downside risks. 
    Global trade loosing ground due to tariff wars. 
    MPC observed real GDP surged to a high in Q1 on the back of strong investments and exports.
    Observed double digital growth in mfg activity while services moderated from a high base.
    IIP accelerated in July 2018. 
    Retail inflation has eased in July & August except in fuel & light category. 
    Households reported a sharp uptick in inflation expectations three months ahead. 
    Inflation expectations for a year ahead have moderated.
    Forex reserves of $405 bn enough to finance 10 months of imports. 
    Exports maintained double digit growth in July & August.
    Our forex reserves of USD 405 bn sufficient to support ten months of imports.
    Depreciation of rupee has been moderate compared to EME peers.
    RBI’s response to these unsettled conditions is to ensure foreign exchange market remains liquid.

  • Factors influencing RBI’s inflation outlook##Factors influencing RBI’s inflation outlook 

    Food inflation has remained unusually benign which imparts a downward bias to its trajectory in 2H.
    Risk to food inflation from spatially and temporally uneven rainfall is mitigated.
    Inflation outlook will be influenced by price of the Indian basket of crude oil .
    International financial markets remained volatile with EME currencies depreciating significantly.
    HRA effect came off its peak in June and is dissipating gradually on expected lines.

  • Rupee weakens after RBI maintains status-quo, is 74 to the dollar for the first time##Rupee weakens after RBI maintains status-quo, is 74 to the dollar for the first time

  • RBI Monetary Policy Committee keeps repo rate unchaged at 6.50%##RBI Monetary Policy Committee keeps repo rate unchaged at 6.50%

    The Reserve Bank of India (RBI) on Friday surprised everyone by keeping repo rate unchanged at 6.50 percent and the reverse repo rate at 6.25 percent. The RBI Monetary Policy Committee said its decision is consistent with the stance of calibrated tightening of monetary policy to achieve the medium-term 4 percent CPI target. The CPI inflation has been projected at 4 percent in Q2FY19, 3.9-4.5 percent in H2 and 4.8 percent in Q1FY20. 

  • Sensex, Nifty recover mildly ahead of RBI monetary policy decision##Sensex, Nifty recover mildly ahead of RBI monetary policy decision

    The BSE Sensex traded at 34,762.73, lower by 406.43 points, or 1.16 percent, while the NSE Nifty50 was at 10,421.90, down by 177.35 points, or 1.67 percent ahead of the crucial October Monetary Policy Committee meeting today. 

  • Rupee woes, higher crude oil prices weigh on RBI policymakers’ mind ahead of MPC outcome##Rupee woes, higher crude oil prices weigh on RBI policymakers’ mind ahead of MPC outcome

    A 25 basis point repo rate hike to 6.75 percent would mean a 75 basis point rise since June, the steepest increase since the last tightening cycle, between September 2013 and January 2014, when India faced its worst currency crisis since the 1990s. A September 19-25 Reuters poll showed 35 of 64 respondents expect a rate hike on Friday. In a July poll, only 11 of 56 projected the rate to be 6.75 percent by December. While a majority of analysts expect a quarter-point raise, some analysts said they would not be surprised if there's a 50 bps increase, given surging oil prices and the rupee's battering. The rupee, which inched towards 74 to the dollar on Thursday, has fallen 13.5 percent in 2018, making it Asia's worst-performing currency. Emerging market central banks including Indonesia, Argentina, Philippines and Turkey have raised rates to contain inflation pressures and currency weakness with the U.S. Federal Reserve set to keep raising rates. (Reuters)

  • Rate hike will make domestic yields on debt more attractive for foreign investors, curb inflation##Rate hike will make domestic yields on debt more attractive for foreign investors, curb inflation

    A rate hike should make domestic yields on debt more attractive for foreign investors and contain inflationary pressures from high crude prices as India imports more than two-thirds of its oil needs. The monetary policy committee will hike interest rates by 25 basis points to battle inflation risks from costly crude oil and the weak rupee as well as "provide assurance about durable liquidity," predicted A. Prasanna, chief economist at ICICI Securities Primary Dealership. "You cannot wish away the depreciation in the rupee if you are a current account deficit country," he said, adding that another reason to hike is so India does not "fall behind the curve in terms of interest rate differential given that central banks globally are raising interest rates." (Reuters)

  • Majority of the bankers do not expect additional measures by RBI to ease liquidity##Majority of the bankers do not expect additional measures by RBI to ease liquidity 

  • Rupee weakens further against US dollar on capital outflows; RBI policy in focus##Rupee weakens further against US dollar on capital outflows; RBI policy in focus


    Indian rupee rounded out a tough week with further declines in the opening trade on Monday due to overseas fund outflows, triggered by surging US Treasury yields and crude oil prices racing to a four-year high. Read more

  • Three must-see charts about upcoming RBI policy##Three must-see charts about upcoming RBI policy


    The Reserve Bank of India (RBI) in its bi-monthly policy is likely to increase the repurchase rate by 25 basis points as inflation is expected to accelerate further due to higher crude prices and the weakness in rupee. One basis point is a hundredth of a percentage point. Read more

  • RBI monetary policy: 80% of market participants, economists expect rate hike##RBI monetary policy: 80% of market participants, economists expect rate hike

    The Reserve Bank of India (RBI) in its bi-monthly policy is likely to increase the repo rate by 25 basis points in the upcoming monetary policy review as inflation is expected to accelerate further due to higher crude prices and the weakness in rupee. One basis point is a hundredth of a percentage point. CNBC-TV18 spoke to market participants, economists and 80 percent of them believe RBI will hike rates tomorrow. Also, 70 percent of the participants believe that there will be no new measures to ease liquidity. Watch full video here.

  • RBI may not increase rate just to address the falling rupee, says HSBC India##RBI may not increase rate just to address the falling rupee, says HSBC India


    The Reserve Bank of India (RBI) may not aggressively increase rate just ot address the falling rupee, said Hitendra Dave, head of global banking and markets, HSBC India. "So far, the Monetary Policy Committee (MPC) has studiously maintained that they have only one mandate which is inflation targeting 4 percent, plus and minus 2 percent," Dave said. Read more

  • RBI, the new sheriff in town, is trigger happy. It must stop##RBI, the new sheriff in town, is trigger happy. It must stop


    The Reserve Bank of India (RBI) has in the recent past been flexing its muscles when it comes to governance and management of private banks.

    First, it went after Shikha Sharma at Axis Bank, then it was the turn of Chanda Kochhar of ICICI Bank, and recently, it was Rana Kapoor at Yes Bank who was at the receiving end.

    Not to forget, the RBI also rejected the proposal of Kotak Mahindra Bank to reduce its promoter shareholding by issuance of preference shares. Read more

  • As per CNBC-TV18 Poll, 60% bankers expect a repo rate hike of 25 bps today##As per CNBC-TV18 Poll, 60% bankers expect a repo rate hike of 25 bps today

  • Don’t expect market to take much cue from RBI's rate hike, says Anup Maheshwari of IIFL##Don’t expect market to take much cue from RBI's rate hike, says Anup Maheshwari of IIFL


    Anup Maheshwari, Joint CEO & CIO at IIFL Asset Management Company, spoke to CNBC-TV18 about the current volatility in the equity markets and shares his outlook. “Whenever liquidity is tight, interest rates are heading up it is bound to have some negative effect on the asset class. The consequence of that is that earnings do get downgraded eventually,” Maheshwari said on Thursday. "However, these kind of corrections are good in terms of longer term profile of asset class and an opportunity for investors. One will have to make some changes in portfolios," he added. Read more

  • RBI Policy: Rate hike on the cards as sinking rupee likely to keep pressure on inflation##RBI Policy: Rate hike on the cards as sinking rupee likely to keep pressure on inflation

    The RBI will probably raise interest rates by a quarter of a percentage point on Friday and provide guidance on curbing rupee's fall. The predicted rate hike would be the RBI’s third this year, after it lifted borrowing costs in June and August. The central bank’s hawkish tilt, despite relatively tame inflation, is to prop up a retreating rupee, according to economists. The resolution of the RBI’s monetary policy committee (MPC) meeting for the fourth bi-monthly monetary policy review for 2018-19 will be announced after 2.30pm on October 6. A majority of the economists in CNBC-TV18’s MPC have asked for a rate hike looking at the sheer plunge in rupee. Read more