Despite Policy Rate Hike, CB Stresses Still In Easing Cycle

• Says policy rate hike two weeks ago was to address certain imbalances and not end of current policy stance• CB on Aug. 10 hiked policy rates by 50 bps and banks’ statutory reserve ratio by 200 bps• CB believes policy actions are unlikely to have a meaningful impact on private credit and economic growth

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Pushing back on claims made to the effect of reversal in the monetary policy towards a hawkish stance from a dovish stance, the Central Bank said it hasn’t made a turnabout and the measures last week were predominantly aimed at addressing some of the imbalances cropped up in the last few months in the foreign exchange market and also to pre-empt signs of some price pressures.

Last week, in a somewhat surprise move, the Monetary Board raised key policy rates by 50 basis points and banks’ statutory reserve ratio by 200 basis points, visibly ending a more than two-year-long easing cycle, which gathered in intensity since the onset of the pandemic, last year.

But the Central Bank pushed back on how last week’s actions were portrayed or interpreted, adding that it has not changed its policy and hasn’t really changed cycles.