LIVE: RBI Monetary Policy Review - MPC Meeting Outcome ANNOUNCED | 50 bps Repo Rate Hiked - TOP THINGS TO KNOW
The Reserve Bank of Indias rate-setting panel on Wednesday began its three-day deliberations on the next bi-monthly monetary policy amid expectations of at least a 35-basis-point hike in the interest rate to check high retail inflation. Both the central bank and the government have been taking steps to contain inflation which is ruling above thye RBIs comfort level of 6 per cent since January this year. Here are all LIVE UPDATES:-
LIVE: RBI MPC Meeting August 2022: Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday announced the rise of policy rate by 50 basis points to 5.4 per cent. Announcing the decision of the Monetary Policy Committee (MPC) during its three-day meeting, Das said it has been decided to increase the policy rate by 50bps to 5.4 per cent with immediate effect. He also said the domestic economy is showing signs of broadening. The Reserve Bank of India's rate-setting panel on Wednesday began its three-day deliberations on the next bi-monthly monetary policy amid expectations of at least a 35-basis-point hike in the interest rate to check high retail inflation. Both the central bank and the government have been taking steps to contain inflation which is ruling above thye RBI's comfort level of 6 per cent since January this year. Here are all LIVE UPDATES:-
WATCH FULL VIDEO: RBI MPC Monetary Policy Review Announcement by Governor Shaktikanta Das
Latest Updates
Inflation projection for FY23 retained at 6.7 pc on assumption of normal monsoon and crude oil at USD 105/barrel, says RBI Guv.
Rise in term deposit rates should increase liquidity for financial sector: Das.
Surplus liquidity in the banking system has come down to Rs 3.8 lakh crore, from Rs 6.7 lakh crore in April-May: Das.
Rupee has moved in orderly fashion, depreciating 4.7 pc till Aug 4; RBI remains watchful of INR movement: Das.
FPIs after remaining in exit mode in first quarter have turned positive in July, says RBI Governor.
Decline in rupee is more due to appreciation of USD than on account of weakness in Indian economy: Das.
FDI inflows improved to USD 13.6 bn in Q1 this fiscal, against USD 11.6 bn in corresponding period last year: Das.
India's forex reserves remain fourth largest globally, says RBI Guv.
Rupee has moved in orderly fashion, depreciating 4.7 pc till Aug 4; RBI remains watchful of INR movement: Das.
FPIs after remaining in exit mode in first quarter have turned positive in July, says RBI Governor.
Rise in term deposit rates should increase liquidity for financial sector: Das.
Surplus liquidity in the banking system has come down to Rs 3.8 lakh crore, from Rs 6.7 lakh crore in April-May: Das.
Inflation projection for FY23 retained at 6.7 pc on assumption of normal monsoon and crude oil at USD 105/barrel, says RBI Guv.
Edible oil prices likely to soften further, says RBI Guv.
Indian economy faces headwinds from global factors like geo-political risks: RBI Guv.
Inflation projection for FY23 retained at 6.7 pc on assumption of normal monsoon and crude oil at USD 105/barrel, says RBI Guv.
Bank credit growth has accelerated 14 pc as against 5.5 pc year ago, says RBI Guv.
Domestic economic activity showing signs of broadening; rural demand shows mix trend: RBI Governor.
RBI retains its economic growth projection at 7.2 per cent for current fiscal, says RBI Guv.
MPC decides to focus on withdrawal of accommodative policy stance to check inflation.
Consumer price inflation remains uncomfortably high; inflation expected to remain above 6 pc: RBI Governor
MPC takes unanimous decision to raise benchmark lending rate by 50 bps to 5.40 pc: RBI Governor.
Financial sector remains well capitalised; India's forex reserves provide insurance against global spillovers: RBI Governor.
India facing USD 13.3 billion capital outflow in last few months: RBI Governor.
Indian economy has been grappling with high inflation, says RBI Guv.
IMF has revised downwards economic growth projection and expressed risk of recession: RBI Governor Shaktikanta Das.
LIVE: RBI Monetary Policy Review - Outcome ANNOUNCED - 50 bps Repo Rate Hiked - WATCH RBI Address LIVE
LIVE: RBI MPC Meeting Outcome announcement begins - WATCH LIVE Governor Shaktikanta Das Address
India rupee volatility hits over 4-months high ahead of RBI
The Indian rupee`s volatility, measured in terms of the daily close-to-close, reached its highest level since late-March ahead of the Reserve Bank of India`s policy decision.
The RBI is widely expected to raise the repo rate as it continues its battle to control inflation. Economists, however, differ on the size of the rate hike that the RBI will deliver as the central bank aims to strike the right balance between inflation and growth.
**1-month expected OTC volatility at 5.30%, highest in two weeks. Implied volatility on out-of-the-money exchange traded options expiring Aug. 26 at 5.5%-6%.
**The daily close-to-close rupee realized volatility climbs to 6.2% from 5.7% on Thursday.
**The rupee this week so far has traded in a wide 78.49 to 79.8075 range amid worries over a record trade deficit and RBI intervention.
**"Historically, whenever the implied volatility in options has been priced higher ahead of the policy, there tends to be lower-than-expected volatility in the pair (USD/INR)," Anindya Banerjee, vice president at Kotak Securities, said.
**Rupee trading at 79.08 per U.S. dollar compared with 79.4650 on Thursday.
WATCH LIVE: RBI MPC Monetary Policy Review Announcement by Governor Shaktikanta Das
Indian rupee strengthens ahead of RBI decision
The Indian rupee firmed ahead of a central bank monetary policy decision on Friday, supported by overnight weakness in oil prices and the dollar.
The partially convertible rupee was trading at 79.15 per dollar in early morning, compared to its previous close of 79.4650.Markets are keenly awaiting the Reserve Bank of India`s policy decision at the end of a three-day meeting, where it`s widely expected to increase its key interest rate from anywhere between 25 basis points and 50 basis points.
India bond yields fall ahead of RBI policy decision
Indian government bond yields dropped on Friday, with the 10-year yield trading at a three-month low, after global oil prices fell overnight, while market participants awaited a Reserve Bank of India policy decision for further cues.
The 10-year bond yield was trading at 7.1141%, as of 0340 GMT, after ending at 7.1566% on Thursday.
The benchmark Brent crude oil contract ended 3.7% lower at $94.12 per barrel on Thursday amid worries over fuel demand.
Indian shares rise ahead of RBI rate decision
Indian shares edged higher on Friday ahead of an expected rate hike by the country`s central bank, which is aiming to tame persistently high inflation in Asia`s third-largest economy.
India`s annual consumer inflation remained above the 7% mark in June and beyond the Reserve Bank of India`s (RBI) upper tolerance limit of 6% for the sixth month in a row.
The NSE Nifty 50 index was up 0.23% at 17,421.35, as of 0346 GMT, and the S&P BSE Sensex rose 0.21% to 58,418.86.
The RBI has raised rates twice since May, with a 40-basis-point hike at an unscheduled meeting, followed by 50 basis points in June.
Rupee rises 46 paise to 78.94 against US dollar in early trade.
The rupee depreciated by 25 paise to close at 79.40 against the US dollar on Thursday, posting its second day of losses amid disappointing macroeconomic data and US-China tensions.
Participants also stayed on the sidelines ahead of the RBI's interest rate decision on Friday, forex traders said.
Amit Jain, BTG Legal Partner
"Increase in Repo rates could encourage Indian subsidiaries of the MNCs and start-ups to channelize their borrowings from overseas group companies. The interest payment on such borrowings could lead to increase in tax costs and hit the bottom line of these entities. Thin Capitalization Rules introduced in 2017 limit the tax deductibility of interest paid to overseas group companies and indirectly lead to higher taxes. Refreshing the deductibility thresholds for interest expense of MNCs is the need of the hour."
Rohit Arora, CEO & Co-Founder, Biz2Credit & Biz2X
“Inflation pressure is expected to increase in the coming months as food prices continue to rise. This will put upward pressure on repo rates, which are currently at historical lows. The RBI is likely to increase rates by 50bps in its next policy meeting, in order to combat inflation and prevent further depreciation of the rupee. The trade deficit has increased sharply in recent months, reaching a record high of $31 billion. This puts additional pressure on the RBI to take action to prevent further currency depreciation. Geopolitical conditions are becoming increasingly uncertain, with tensions between US-Taiwan- china. This adds to the already volatile environment for financial markets and increases the likelihood of further volatility in commodity prices.”
Dr Sachchidanand Shukla, Chief Economist, Mahindra and Mahindra
"RBI's MPC is expected to hike the repo rate by 40 bps in the upcoming policy meeting as inflation prints continue to remain above MPC's comfort level for six consecutive months. After US Fed has hiked its policy rate by 75 bps in its latest policy meet, RBI is expected to hike rate for the third time this year. However, MPC may go slow on the hiking as recent prints suggest softening of the inflationary pressures. With the easing of global commodity prices, CPI inflation seems to have broadly peaked at the current levels and is expected to witness a downward movement. As a result, we expect CPI prints to average around 6% by Q4-FY23. CRR is likely to be left unchanged in this policy meet as surplus liquidity hovers around 1.5% of the NDTL mark. However, liquidity will remain constrained around current levels owing to a drawdown of forex reserves amid global pressures, a pick-up in government spending and higher credit growth. Credit growth has remained in double digits in the past couple of months. With the ongoing economic recovery, we expect GDP growth to average 7-7.2% and inflation at 6.6% in FY23."
The RBI mainly factors in retail inflation based on Consumer Price Index (CPI) while arriving at its monetary policy. The inflation was 7.01 per cent in June.
The government has tasked the RBI to ensure consumer price index-based inflation remains at 4 per cent with a margin of two per cent on either side.
Umesh Revankar, MD & CEO, Shriram Transport Finance Company said the MPC is expected to unanimously vote for an upward of 35 bps hike in policy rates in August 2022 as the domestic macro-economy has not changed much since the previous policy.
Punjab & Sind Bank managing director Swarup Kumar Saha said he expects RBI to hike the repo rate between 35 bps and 50 bps this week in view of the prevailing economic situation.
Experts are of the view that the RBI would raise the benchmark rate to at least the pre-pandemic level this week and even further in later months.
The existing repo rate of 4.9 per cent is still below the pre-Covid level of 5.15 per cent. The central bank sharply reduced the repo rate in 2020 to tide over the crisis induced by the pandemic.
The RBI raised the short-term borrowing rate (repo) twice so far this fiscal -- by 40 basis points (bps) in May and 50 bps in June to tame retail inflation.
Finance Minister Nirmala Sitharaman in Rajya Sabha on Tuesday said: "We have made sure that the Reserve Bank of India and the Government, put together, are taking enough steps to make sure that it is kept in the band of 7 or ideally below 6".
Both the central bank and the government have been taking steps to contain inflation which is ruling above thye RBI's comfort level of 6 per cent since January this year.
Announcement on Aug 5
Headed by RBI Governor Shaktikanta Das, the Monetary Policy Committee (MPC) is scheduled to announce its decision on August 5.
The central bank has already announced to gradually withdraw its accommodative monetary policy stance.
3rd hike
It might be the third consecutive hike in the repo rate or short-term lending rate in the last three months.
35-basis-point hike
The Reserve Bank of India's rate-setting panel on Wednesday began its three-day deliberations on the next bi-monthly monetary policy amid expectations of at least a 35-basis-point hike in the interest rate to check high retail inflation.
Shishir Baijal, Chairman and Managing Director, Knight Frank India
“With the consumer inflation still above tolerance level, even while some key components like crude oil have improved, keeping a check on the liquidity and expenditure is going to be the RBI’s priority. Given this, we expect the RBI to revise the policy interest rates yet again. We anticipate the upwards revision to be in the range of 35 – 40 BPS, taking the total change since May 2022 to 125 - 130 BPS higher.
From the real estate sector’s standpoint, an upward revision will impact the sentiments of home buyers, who have remained positive despite the last set of revisions that led to a rise in home loan interest rates. A further increase in REPO rates will lead to a proportionate erosion of affordability, thereby can possibly impact sales momentum.”RBI likely to raise key policy rate by at least 35 bps to check inflation: Experts
Days after the US Fed raised the interest rate, the RBI may go in for its third consecutive policy rate hike by at least 35 basis points to check high retail inflation, experts said. The central bank has already announced to gradually withdraw its accommodative monetary policy stance. The Reserve Bank of India's rate-setting panel -- the Monetary Policy Committee -- will meet for three days from August 3 to deliberate on the prevailing economic situation and announce its bi-monthly review on Friday.
RBI to raise rates in August but no consensus on size of hike - Reuters Poll
Mohit Ralhan, Global CEO and Managing Partner, TIW Capital Group
“The August meeting of MPC is one of the most crucial ones as the Indian economy is at a critical juncture. June marked the sixth straight month when inflation at 7.01% came higher than the upper tolerance level of RBI. RBI also needs to look at the policy rate increases in the USA, as it would want to keep the spread under control. The US Fed has already increased the policy rates by 2.25% and a further hike by 1% is expected in 2022. At home, RBI has till now increased interest rates by 0.9%. The inflation in agri-commodities around the globe is showing no signs of abetment, while the Russia-Ukraine war still continues. The continuation of supply chain issues amidst the zero covid policy of China and labor shortages in major economies have made the fight against inflation quite challenging. Therefore, a significant rate hike is likely, which may or may not happen in one shot and RBI may like to spread it over this year. A 0.35% to 0.5% hike in the next meeting looks likely followed by another similar hike later in this year if inflation continues to rage above 7%.”
Ravi Subramanian, MD & CEO, Shriram Housing Finance
“The MPC in its August policy announcement is likely to hike rates upward of 35bps, however, I don’t anticipate a jumbo-sized hike like other major central banks namely US Fed or ECB. This is because in the absence of any fresh shocks, economic conditions in India have marginally improved and therefore an aggressive rate path is not warranted. In fact, any supersized hike in repo rate will go against the palpable recovery in productive sectors like housing and construction which have the highest forward and backward linkages in the economy. The inflation trajectory is above the RBI’s comfort level of 4% (+/-2%). Therefore, the MPC will opt for interest rate increases in smaller doses till the general price level falls within the RBI’s comfort band. Such guidance will temper the future rate hike concerns and soothe the nerves of the market. Also, I expect MPC to shift its policy stance from 'calibrated tightening’ to `neutral’ in its forthcoming resolution.”
Dr Ravi Modani, Founder & CEO, 121 Finance
“I feel MPC will not increase the interest rates, and this will be a balancing act to maintain the local demand, after calibrating it with the loss of potential export demand from the US reaching a recession. With good monsoons in place, they would like to maintain the domestic consumer demand. Already the WPI has eased substantially with commodity prices going down and growth in CPI seems to have plateaued for the moment. With non-US Dollar currencies being used to pay for crude, India is quite comfortable with its reserves. Only the reduced inflow of forex might be a cause of worry, especially after the Fed’s 75 bps increase, for which the recent measures of RBI to attract Indian diaspora for NRE deposits will balance it substantially. Overall, I do not see any increase and this should act as a catalyst to maintain the economic growth.”
The retail inflation based on Consumer Price Index (CPI), which RBI factors in while arriving at its monetary policy, is above 6 per cent since January 2022. It was 7.01 per cent in June.
Factoring in peak inflation in the July-September quarter, "we now expect a 35 bps hike in August, followed by three 25 bps for the terminal rate to level off at 6 per cent by end-FY23", she opined.
In a report, Radhika Rao, Executive Director and Senior Economist at DBS Group Research, said the RBI monetary policy committee is expected to stay focused on price stability over the next two quarters.
"In our estimate, it is expected to be in the range of 20-25 basis points," he said.
The government has tasked the RBI to ensure consumer price index-based inflation remains at 4 per cent with a margin of two per cent on either side.
Dhruv Agarwala, Group CEO of Housing.Com, said while other banking regulators across the world, including the Fed, are raising rates aggressively, the situation in India does not warrant that kind of approach yet.The government has tasked the RBI to ensure consumer price index-based inflation remains at 4 per cent with a margin of two per cent on either side.
"... In the absence of any fresh shocks, India's inflation trajectory is likely to evolve in line with the RBI's projections. Hence, we expect that the RBI may hike rates by only 25 bps in Aug'22, followed by another 25 bps rate hikes in the next two meetings," it said.
However, conditions in India do not warrant an aggressive stance by the RBI, it added.
A research report by Bank of Baroda said that while the US Federal Reserve raised the rate by 225 bps in CY22, the RBI has hiked the repo rate by 90 bps. An aggressive rate hike by the Fed is feeding expectations that the RBI may also front load its rate hikes.
Experts are of the view that the RBI would raise the benchmark rate to at least the pre-pandemic level this week and even further in later months.
"We now expect the RBI MPC to raise the policy repo rate by 35 bps on August 5 and change the stance to calibrated tightening," BofA Global Research report said.
The possibility of an aggressive 50 bps and a measured 25 bps hike cannot be ruled out either, it added.
"We now expect the RBI MPC to raise the policy repo rate by 35 bps on August 5 and change the stance to calibrated tightening," BofA Global Research report said.
Experts are of the view that the RBI would raise the benchmark rate to at least the pre-pandemic level this week and even further in later months.
The existing repo rate of 4.9 per cent is still below the pre-Covid level of 5.15 per cent. The central bank sharply reduced the benchmark rate in 2020 to tide over the crisis created by the pandemic.
With retail inflation ruling above 6 per cent for six months continuously, the RBI had raised the short-term borrowing rate (repo) twice so far this fiscal -- by 40 basis points in May and 50 basis points in June.
The Reserve Bank of India's rate-setting panel -- the Monetary Policy Committee -- will meet for three days from August 3 to deliberate on the prevailing economic situation and announce its bi-monthly review on Friday.
The central bank has already announced to gradually withdraw its accommodative monetary policy stance.
Days after the US Fed raised the interest rate, the RBI may go in for its third consecutive policy rate hike by at least 35 basis points to check high retail inflation, experts said.
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