RBI policy meeting October 2023: MPC keeps repo rate, stance unchanged; here's what experts say

RBI MPC meeting October 2023, RBI Monetary policy repo rate: As widely expected, the six-member monetary policy committee (MPC) of the Reserve Bank of India (RBI) unanimously decided to keep the repo rate—the key interest rate at which the RBI lends money to commercial banks—unchanged at 6.5 per cent in its latest bi-monthly monetary policy meeting that was held between October 4 and October 6. India is poised to become the new growth engine of the world, RBI Governor Shaktikanta Das said while addressing the nation.

Here is what experts, analysts, and industry leaders have to say about the October 2023 RBI Monetary Policy Review:

Anuj Puri, Chairman of ANAROCK Group

"The unchanged repo rate is a festive bonanza for homebuyers and gives them yet another opportunity to make cost-optimized home purchases. If we consider the present trends, the overall consumer market looks bullish across sectors, particularly the automobile and housing markets, which in many ways reflect the health of the economy. We are entering the festive quarter with a very strong momentum in housing sales, and unchanged interest rates will act as a major catalyst for growth in the residential market. As per ANAROCK Research, housing sales across the top 7 cities created a new peak in Q3 2023 (despite the usually slow monsoon quarter) and stood at 1,20,280 units as against over 88,230 units sold in Q3 2022, thus recording 36 per cent yearly growth. Thanks to the stable repo rate and the resultantly stable home loan interest rates, we can expect the momentum to continue."

Vinod Nair, Head of Research, Geojit Financial Services

"On a positive note, interest rates haven't increased as anticipated, however, they are expected to remain elevated for an extended period. This will have an implication on rate-sensitive sectors like banking, auto, core industries, and heavy-weighted balance sheet companies. The elevated global bond yields and appreciation of the US dollar will affect the domestic economy and capital flows. However, it should not have a deep overhang effect on the economy but rather a mixed bias in the short term. The inclusion of government securities in the global bond index and moderation in inflation, like food & international commodity prices, will support INR and domestic corporate profit even in a volatile global currency market."

Umesh Kumar Mehta, Chief Investment Officer, SAMCO Mutual Fund

"Equities may have to compete with bonds in the short run. It is indeed a turning pitch as far as inflation is concerned for RBI but on the other side global market forces are scaring all the central bankers on higher bond yields, which are getting stronger by the day. The current pause wouldn’t last long, for that matter, for any central banks. The rates are likely to move higher before the actual pivot happens sometime in the middle of the next year. So, Equities will have serious competition from bonds going forward."

Anitha Rangan, Economist, Equirus Capital

“Despite global uncertainties that warrant close monitoring, RBI chose to keep the policy rate unchanged at 6.5 per cent and maintain its “withdrawal of accommodation” stance. Notably, RBI highlighted high inflation as the major risk to macro stability. The high inflation risk is emanating from volatile food and energy prices both domestically and globally, driven by geo-political factors and climate changes. While headline inflation is expected to moderate in the near term, RBI did cite that outlook uncertainty on food inflation comes from lower reservoir levels, lower sowing, and volatile global food and energy prices. The positive driver is that core inflation is softening and is critical for keeping the headline inflation lower. Three statements from the policy give us a very hawkish outlook a) comment that tight global monetary stance could persist higher than expected b) food inflation pressures may not see sustained easing c) reserves position continuing to decline with the September-23 overall having seen ~$12 billion of decline to contain rupee volatility suggest that RBI is on a vigilant watch mode. While batting defensively on a turning pitch, RBI remains very careful. As long as currency is maintained long pause is the call. However, on a turning pitch, a surprise shot can emerge at any time.”

Raghvendra Nath, Managing Director, Ladderup Wealth Management

“In order to maintain the nation's strong growth rate, RBI was anticipated to leave the repo unchanged. Given the growing oil prices and the current global difficulties, the central bank has little reason to become more dovish at this point. The high-interest rates are here to stay for quite some time before we see any changes being announced by the central banks.”

Prasenjit Basu, Chief Economist, ICICI Securities

"Unsurprisingly, the RBI’s MPC decided to keep its policy rate unchanged at 6.5 per cent and retained its stance of ‘withdrawal of accommodation’. The key change is a much more benign inflation forecast, suggesting that the we continue to expect the next policy move to be a rate cut in Q1FY25."

Amit Somani, Senior Fund Manager – Fixed Income, Tata Asset Management

"RBI will maintain tighter liquidity conditions to address higher Inflation risks. Short-term rates are likely to remain elevated in the near term factoring in tighter liquidity conditions going forward. RBI formally unleashing Bond Open Market Operations (OMO)  sale tool in policy to manage liquidity would weigh on yields in the near term. This tool, however, may be used only judiciously to deal with large inflows causing banking system liquidity to stay in surplus zone. RBI would target an inflation rate of 4 per cent and not a 2 per cent-6 per cent range, again signaling the policy rates to remain higher for longer until Inflation is projected to come below 4 per cent. RBI’s sharp focus on bringing down inflation is positive for markets in the medium-to-long term."

Ajit Kabi, Banking analyst at LKP Securities

"RBI kept the policy rate unchanged at 6.5 per cent. This is the fourth consecutive time the RBI maintained the status quo. Additionally, the retail inflation is projected at 5.4 per cent (unchanged) for FY24. RBI has raised the limit of gold loans given by urban cooperative banks to 4 lakhs from 2 lakhs earlier. To manage liquidity, RBI may enter into OMO sales."

Tribhuwan Adhikari, MD & CEO of LIC Housing Finance

"RBI's decision to maintain the repo rate unchanged in today’s MPC meeting is on expected lines. The move demonstrates RBI's continued commitment to support growth and maintain economic stability. The steady interest rate environment will help us in keeping our offerings competitive and affordable.  Overall, the move will improve the sentiments.”

Niraj Kumar, Chief Investment Officer, Future Generali India Life Insurance Company 

"MPC has delivered an In-line and balanced policy, with the overarching focus being maintaining the stability in policy stance, despite being clouded by the chaos in global rates market and commodities. While the MPC’s mention of the need for OMO sales has slightly spooked the markets in the interim, it’s imperative from a liquidity standpoint, especially with Global bond index inclusion on the horizon. Overall, the MPC has stuck to a theme of continuity in the policy exercising caution and being data-dependent amid the looming uncertainty around global markets."

READ MORE —Catch LIVE updates on the October 4-6 review of the RBI's MPC here. Find the latest minute-by-minute stock market updates here.