The six-member Monetary Policy Committee (MPC), which serves as the interest rate-setting body of the Reserve Bank of India (RBI), has kept its policy rates unchanged for the second consecutive time in June. The decision to maintain the status quo on policy rates was anticipated, considering the recent decline in inflation. This provides the RBI with an opportunity to adopt a more cautious approach, allowing it to assess the outcomes of previous rate hikes.
In the current interest rate hike cycle, the MPC has raised the repurchase rate (repo rate) from 4% in May ‘22 to 6.5%, indicating a hike of 250 basis points. In April and now in June, the MPC has chosen to maintain policy rates at their current levels without making any changes.
To provide some background on the rate hike cycle, following the Covid-19 pandemic, inflation measured by the Consumer Price Index (CPI) remained above the 6% threshold for several quarters. This necessitated the MPC to implement a series of consecutive rate hikes. The MPC’s mandate is to maintain inflation at a level of 4% within a band of 2% on either side.
With the status quo in June, the repurchase rate (repo) now stands at 6.5%, and the policy stance has been kept at ‘withdrawal of accommodation.’ The repo rate is the interest rate at which banks borrow from the RBI in times of tight liquidity in exchange for government securities as collateral. The repo rate influences all the other interest rates in the system such as banks’ lending and borrowing rates. It also influences yields on government and corporate bonds. The policy stance gives some indication of the future direction of the upcoming reviews.
After the June policy review, two things have become clear: One, we may have reached the end of the rate-hike cycle and two, the RBI is now working towards keeping inflation tamed at 4%.
この記事は Beyond Market の June, 2023 版に掲載されています。
7 日間の Magzter GOLD 無料トライアルを開始して、何千もの厳選されたプレミアム ストーリー、8,500 以上の雑誌や新聞にアクセスしてください。
すでに購読者です ? サインイン
この記事は Beyond Market の June, 2023 版に掲載されています。
7 日間の Magzter GOLD 無料トライアルを開始して、何千もの厳選されたプレミアム ストーリー、8,500 以上の雑誌や新聞にアクセスしてください。
すでに購読者です? サインイン
IMPORTANT JARGON
TRANSITIONING SFBs TO UBs: RBI’s NEW GUIDELINES - The Reserve Bank of India recently issued new guidelines outlining the transition process for Small Finance Banks (SFBs) to become Universal Banks (UBs).
NAVIGATING INDIA'S MARKET WITH HOWARD MARKS
Howard Marks' focus on cycles and capital preservation translates to a defensive strategy for India's frothy market: prioritize cash, target undervalued sectors, and diversify
FINDING A BETTER FIT
Switch health insurers at renewal to keep benefits such as waiting period and bonus, but weigh drawbacks
SILVER SQUEEZE
Green tech boom strains supply, propelling silver as a sustainable investment
A PODCASTING FUTURE
India's podcast scene explodes with formats and listeners, primed for digital growth, with high-quality content reigning supreme
BOUNCING BACK WITH DOMESTIC FOCUS
Despite challenges, India's tyre industry remains optimistic about doubling revenue by 2032
HIGHWAY HICCUPS?
Slowdown in awarding highway projects, driven by industry factors and project complexities, pushes NHAI towards debt reduction and private partnerships for sustainable development
CONTENT CONQUEST
JIOCINEMA'S ULTRA-LOW PLAN SHAKES INDIA'S STREAMING SCENE, AIMING FOR AD REVENUE AND LEVERAGING STRENGTHS TO BECOME A BIG PLAYER
CAUGHT BETWEEN CAUTION AND GROWTH
RBI's draft on project financing seems to be a pre-emptive measure to prevent large defaults on infrastructure loans. However, in their current form, the requirements look onerous for banks
HOT OR HYPE?
India's 2024 IPO market sizzles with investor cash, but will it be a blockbuster or a box office flop? Valuation worries linger