Most economists welcomed the absence of surprises in the RBI policy statement on September 30, and now expect more increases in the coming reviews, with inflation seen remaining above the central bank's comfort zone.
Most economists cheered the absence of surprises in the RBI policy statement on Friday, as governor Shaktikanta Das announced the Monetary Policy Committee's hike of 50 bps in the repo rate and its decision to continue with its current stance of "withdrawal of accommodation". They now expect more increases in the coming policy reviews, with inflation seen remaining above the central bank's comfort zone.
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Both the decisions were not unanimous, as five out of the six MPC members voted in favour and one against in each case.
The RBI has raised the repo rate — or the key rate at which it lends money to commercial banks — by 190 bps in four instalments since May to 5.9 percent.
Here's how economists are reading the latest RBI policy announcements:
Kaushik Das, Chief Economist, Deutsche Bank:
"Unlike other central banks across the world, the RBI has decided not to surprise and just go along the expected lines, which in a way is a good thing in the current volatile environment," Kaushik Das said.
"The RBI is saying that they'll kind of do operations and make sure that things are not overly tight... The big takeaway is that it will go from policy to policy and decide to look at the global environment. I think more rate hikes are coming in December and probably in February if inflation doesn't come down."
Upasna Bharadwaj, Senior Economist, Kotak Mahindra Bank:
“One aspect of liquidity which the governor has been highlighting is that in the coming few months, we do expect the government will start spending, and liquidity will probably improve. But if we look at the core liquidity, it is probably one aspect where we need to keep in mind," said Upasna Bharadwaj.
"The accommodation remains, and once that is approaching zero or neutral territory is where the overall system-wide we will get a policy stance which will be neutral. That's where the convergence will happen. And, we do expect that the liquidity will tighten, moving more towards neutrality by the end of the year largely because the currency leakage will be offsetting government spending.”
Madan Sabnavis, Chief Economist of Bank of Baroda:
"The policy was much on expected lines, with no real surprise on the policy rate front or even forecasts. The lower GDP forecast is more due to statistical aberrations as their Q2, Q3 and Q4 forecasts have been revised upwards."
"Given the focus on global trends, it appears that we can expect another 50-60 bps hike in course of the year."
"One positive observation is the RBI has said that two-thirds of the decline in reserves is due to valuation which means RBI has not been spending reserves to protect the rupee!"
Prasenjit Basu, Chief Economist, ICICI Securities:
"We expect a further increase of 25 basis points at the December meeting, by which time CPI inflation will likely moderate to 6 percent as the strong kharif crop is harvested. Once real interest rates are positive, the MPC can pause its rate hikes," Prasenjit Basu said.
"All central banks (except China’s) are prioritising the fight against inflation. The US, the Eurozone and the UK currently have much higher inflation rates than their targeted inflation levels. India is only marginally higher than its targeted inflation rate, but has stayed persistently above it for half a year, hence the need to persist with rate hikes."
Ashhish Vaidya, DBS Bank:
"A balanced judgment by the RBI... Inflation will stay sticky for longer than expected."
Indranil Pan, Chief Economist, YES Bank:
"The RBI is standing ready to deepen and elongate its rate hiking cycle consequent to the global dynamics of policy rates. We believe that it would be open to push the repo rate to 6.5 percent levels by February 2023, implying two more hikes — in December by 35 bps and in February by 25 bps."
Dharmakirti Joshi, Chief Economist, CRISIL:
"The MPC’s future actions will be dependent on the trajectory of domestic inflation, developments on the external sector and surprises in actions of other major central banks."
First Published: IST