Mumbai, February 08, 2023:
Mr. Dinesh Khara, Chairman, SBI:
“RBI decision to hike the rate was in consonance with the expectations. Continuing strong job data from Fed has made monetary policy making a delicate balancing act for emerging economies central banks. Beyond the rate hike, there are a bouquet of policies that attend the micro structure of the market. The proposal to address the issue of penal charges on services will bring a rule based regulation. The initiatives on climate risk will improve compliance, capital budgeting and financial disclosures for banks. Providing further impetus to TReDS platform in terms of further augmentation of activities and allowing lending and borrowing government securities will add depth and aid price discoveries across markets.”
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Rajiv Sabharwal, MD & CEO, Tata Capital Ltd.
- The hike in repo-rate is a well calibrated move by the RBI that supports its two-pronged approach of controlling inflation and maintaining financial stability.
- This move will help tame the pressure on the economy caused due to the Fed rate hikes and other external market dynamics that have a direct impact on our domestic economy.
- This will provide some cushion against the impact of the US Fed rates and will help in maintaining the stability of the financial sector.
- Downward momentum in inflation and increase in RBIs foreign exchange reserves over the last few months has provided the necessary comfort to RBI.
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Mr. Indranil Pan – Chief Economist, YES BANK on RBI Monetary Policy
“The policy was well balanced with the focus remaining on removal of accommodation. The 25bps hike was not associated with any change in the stance. The RBI remains focused on core inflation and clearly highlights that the recent softening of inflation was mostly due to the strong seasonal deflation in vegetables, and this might go away in the summer months. The estimates for average inflation is at 5.3% for FY24, still higher than the 4% aspirational target of the RBI. At the current repo rate of 6.5% and last inflation print of 5.7%, the real policy rate has moved to 0.8%. However, the governor indicated that adjusted for inflation, the policy rate is still lower than the pre-pandemic levels. Growth dynamics are seen to be relatively stable and this may also indicate a lower dis-inflationary pressure in the economy, hence calling for any credible central bank of the EME to remain hawk-eyed. Inflection points are always difficult to call, but I think that the rate hiking cycle of the RBI may yet not be over. We remain open to another 25bps increase in the repo rate in April or even later and will critically depend on the inflation prints in the months ahead. For record, our model suggests that the next CPI print can surprise on the higher side to 6.2-6.4%, as food prices are seen to have largely normalized based on data obtained from the Department of Consumer Affairs.”
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Mr. Prasenjit Basu – Chief Economist, ICICI Securities
The RBI has adopted a hawkish stance on inflation, despite 2 of 6 MPC members dissenting both with regard to today’s 25bp rate hike and on the policy stance. With credit growth at its healthiest in 8 years, and real GDP growth resilient amid the global downturn, the RBI sees little need to ease monetary policy in the year ahead. Interest rates are likely to remain elevated at these levels for the rest of CY23.
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Mr. Vikas Garg – Head of Fixed Income, Invesco Mutual Fund.
“RBI walked the talk and moderated the policy rate hike to 25 bps with a continuation of “withdrawal of accommodation” stance, in line with our expectation. A growth-oriented FY24 budget coupled with resilient domestic growth requires tight vigil on core inflation. Global factors provide some uncertainty and may also have a bearing on further policy action. Overall, it was a slightly hawkish commentary compared to market expectations. Future rate actions will be calibrated and more data-dependent as we approach the end stage of the current rate hike cycle. Higher policy rates may stay with us for a bit longer.”
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