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RBI Monetary Policy: RBI Decision To Hike Rates On Expected Lines

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The Monetary Policy Committee of the Reserve Bank of India that met over the last couple of days decided to hike repo rates or rates at which it lends to banks by 25 basis points. Most analysts and observers believe that it was on expected lines.

 
 RBI Monetary Policy: RBI Decision To Hike Rates On Expected Lines

According to Nitin Bavisi, CFO, Ajmera Realty & Infra India, the RBI repo rate hike of 25bps was on the expected line given the retail inflation being well within the lines of moderation and the RBIs limit of 6% tolerance bandwidth along with the projected slug-like GDP performance.

 

"This move will accommodate the anticipated recessionary churn and aid in maintaining the quarterly GDP performance as expected. The RBI's upbeat projection on growth means ample demand and robust consumption in the economy. We foresee a minimal impact of today's hike on homebuyers' sentiment and expect home sales to continue without much of an effect. However, the benefits announced for taxpayers in the budget will balance out. We expect home sales to continue without much of an impact."

Cyrus Mody, Managing Partner, Viceroy Properties too agrees that it was on expected lines. "The RBI hiking repo rates by 25 bps is on expected lines. This is the sixth consecutive rate hike since May 2022 bringing the cumulative rate hike to 250 bps till now. Having said that, we believe that we are near the peak of the rate cycle. Unless inflation goes out of control, we do not expect RBI to hike rates from current levels. We expect the central bank to start easing rates from the next calendar year. The macroeconomic indicators are strong, and most data points are signaling ample demand in the system.

The system liquidity is at comfortable levels thereby creating ample funding avenues for credit-worthy borrowers. We expect strong demand for quality projects developed by reputed names. The commissioning of transit infra projects will continue to create demand in new micro markets," says Cyrus Mody, Managing Partner, Viceroy Properties on the RBI monetary policy.

According to Sandeep Bagla CEO, TRUST Mutual Fund, a 25 bp hike in repo rate by RBI was baked in bond yields. 2 out of 6 MPC members voted for no rate hike. "Market is a tad disappointed as there was no change in stance from "withdrawal of accommodation" to neutral. CPI Inflation is projected for FY24 at 5.3%. Market forecasters are expecting inflation to trend lower from RBI projections. The policy remains focussed on fighting inflation and should be welcomed by markets," Bagla adds.

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