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RBI Governor LIVE: RBI hikes repo rate by 40 bps: How is it going to affect borrowers and depositors?
All of a sudden-and entirely unexpected-the Reserve Bank of India (RBI) on May 4 increased the repo rate by 40 basis points to 4.4 percent for the first time in almost two years since the start of the pandemic in 2020. One basis point is one-hundredth of a percentage point. This comes when inflation has been rising to an 18-month high amidst a rebound in domestic economic activity. “From a real estate point of view, this hike in policy rate is not welcome and will have a negative impact as home loan rates will increase immediately,” says Dr Samantak Das, Chief Economist, and Head Research and REIS, India, JLL. Let’s go into the finer details of this announcement and its impact on the borrowers and depositors. Read more here
RBI Governor LIVE: RBI policy: Bond yields will harden to 7.75%, Nifty to range 17,500-15,000
Breaking away from scheduled announcements, the Reserve Bank of India’s May 4 decision to hike the repo rate by 40 basis points (bps) to 4.4 percent soon after unchanged rates in April is an indication that the RBI is making an early move to recalibrate its normalisation trajectory against higher-than-projected inflation and fast US monetary policy normalisation. Two critical messages from the RBI are a) post the ebbing of Omicron worries, pent-up demand recovery is getting widespread, b) the demand recovery will likely aggravate the inflation scenario, which touched 7 percent in March 21; core inflation has averaged 6 percent in recent months. The RBI has enumerated several factors for the higher-than-expected inflation, most of which were known beforehand. Read more here
RBI Governor LIVE: Gulam Zia, Senior Executive Director- Knight Frank India: “With the rapidly changing geopolitical scenario that continues to pressurize the global supply chain and commodity prices, domestic policy rates were expected to be realigned to the changing scenario. Therefore, while not unexpected, as the RBI Governor had already shared concerns over rising inflation, the interest rate hike amidst rising input costs is expected to have its impact on real estate. The sector has vastly benefited by the low interest rates in the last two years. This policy rate hike will translate into higher EMIs for home loans. However, we believe that improved homebuyer attitude, preference for owning a house and strong wage growth will continue to support the housing market. The monetary policy stance is still accommodative and with the receding pandemic and economic growth, we expect that consumer demand will remain buoyant in the near term”.
RBI Governor LIVE: RBI’s rate hike shock sends markets spiralling lower
Stocks and bonds reacted in knee-jerk fashion after Reserve Bank of India governor Shaktikanta Das announced a surprise 40 basis point increase in the key interest rate on May 4. Citing inflationary pressures that were going beyond control, the RBI’s Monetary Policy Committee (MPC) called an unscheduled meeting and unanimously decided to increase the repo rate to 4.4 percent with immediate effect. The repo rate is the rate at which the RBI lends money to banks for short-term requirements. The interest rate decision finally ends speculation over when the RBI would move away from its ‘accommodative’ stance, even though the governor said that “the 40 bps rate hike today was not a shift in policy accommodation. The stance and policy conditions still remain accommodative and the rate increase merely reversed the 40 bps repo cut delivered in May 2020.” The standing deposit facility rate is now at 4.15 percent. The RBI also decided to increase the cash reserve ratio (CRR) by 50 bps to 4.5 per cent of net demand and time liabilities, effective from the fortnight beginning May 21. Read more here
RBI Governor LIVE: RBI climbs the policy curve, tries to bridge the credibility gap
What changed in the one month since the last monetary policy review for the rate-setting committee to announce a mid-cycle rate hike? After all, the Russia-Ukraine war has been ongoing for two months now, disrupted global supply chains are no closer to being mended than they were a month ago, and even core inflation in India has been above 6 percent for quite some time, which the central bank chose to ignore. The trigger, perhaps, could be a couple of factors. Read more here
RBI Governor LIVE: Rupa Rege Nitsure, Group Chief Economist, L&T Financial Holdings, Mumbai:
“The ‘surprise move’ by the RBI is not a surprise to me given the turn of events in the past few weeks. The central bank has to take these steps to prevent an extreme fall in the value of our currency and protect financial stability. “A hike in the policy repo rate and the CRR are the most appropriate steps when the nation is facing galloping inflation and a widening trade deficit. These are a kind of emergency measures to control extreme financial outcomes.”
RBI Governor LIVE: RBI’s surprise rate hike wipes off Rs 6 lakh crore of investor wealth
The market doubled its losses immediately after the Reserve Bank of India on May 4 stunned everyone by hiking the repo rate and the cash reserve ratio (CRR) to tame inflation and suck out of excess liquidity. The Sensex, which was down 600 points before Governor Shaktikanta Das’ press briefing, fell sharply after the rate hike was announced and ended 1,307 points, or 2.29 percent, down at 55,669. The Nifty took a beating, too, and broke all its crucial support levels to end around the lows of March, down 392 points, or 2.29 percent, at 16,678. Investors lost Rs 6.1 lakh crore of wealth in a single day as the BSE market capitalisation fell to Rs 259.73 lakh crore against Rs 265.88 lakh crore in the previous session. Read more here
RBI Governor LIVE: Radhika Rao, Economist, DBS Bank, Singapore
“India undertook a two-pronged action in its inter-meeting rate review. The 40bp hike front runs the likelihood of an elevated April inflation release (above 7.5%) and comes close to the heels of above-target inflation in Q1 2022. “The move is also intended to keep inflationary expectations anchored, in the middle of persistence of food price pressures, spillover of rising imported commodities and improving pricing power among bigger corporates, just as advanced economies also frontload tightening moves. “Concurrent move to raise the CRR by 50bp also points to a preference for more durable absorption of liquidity.”
RBI Governor LIVE: Ajit Mishra, VP – Research, Religare Broking Ltd:
Markets plunged sharply lower and settled with a cut of over 2%. Participants were in a cautious mood from the beginning ahead of the US Fed meeting outcome scheduled tonight. However, the surprise rate hike by the RBI caught the participants completely off-guard and triggered a kick-jerk reaction. Apart from the policy tightening, hawkish commentary on inflation dragged the key indices lower and the Nifty finally settled around the day’s low to close at 16,667 levels. In line with the benchmark, all sectoral indices ended lower wherein consumer durables, realty and metal were the top losers. The broader markets too ended in line with the benchmark. After the RBI’s surprise move, all eyes are on the US Fed meeting outcome amid the expectation of a 50 bps rate hike. However, we feel their commentary on future rate hikes and inflation would be critical to set the market tone. On the index front, the Nifty has finally breached the consolidation range of 16800-17300 on the downside and now we’re eyeing the 16,400 zone. We suggest aligning positions accordingly and continuing with the “sell on rise” approach.
RBI Governor LIVE: Forex reserves ‘sizeable’, outlook for external sector resilient: RBI Governor
India’s foreign exchange reserves are “sizeable” and the outlook for the country’s overall external sector is bright, Reserve Bank of India (RBI) Governor Shaktikanta Das said during his surprise 40-basis-point repo rate hike announcement on May 4. “Potential market opportunities have opened up due to geopolitical conditions and the recent trade agreements. Strong revenue guidance by major information technology (IT) companies also bodes well for the overall external sector outlook in 2022-23,” Das said. Further, while confident that the current account deficit would be “comfortably financed”, Das however added that the worsening of India’s terms of trade due to elevated commodity prices could lead to widening of the current account deficit. India’s current account deficit rose to a nine-year high of $23 billion in October-December. Read more here
RBI Governor LIVE: Shortages, volatility in markets more acute; global economic recovery losing pace: RBI Guv
The shortages and volatility in financial and commodity markets are becoming “more acute”, and the “global economic recovery is losing pace”, Reserve Bank of India (RBI) Governor Shaktikanta Das said on May 4, as he announced a surprise 40 basis points hike in repo rate. Crude oil prices “will continue to remain high” in the near future, Das said in his announcement, adding that food inflation is “also expected to continue”. In order to contain the inflationary pressures, the Monetary Policy Committee (MPC) has unanimously voted to increase the repo rate to 4.40 percent, added Das. Read more here
