RBI keeps repo rate unchanged

Apr 06, 2023

The RBI had the option of a rate hike or a pause. It opted for the latter. The MPC decided to keep the policy repo rate unchanged at 6.5%.

In May 2020, it was at 4%. Since May 2022, it has been steadily rising from 4.40% to 6.50% in February 2023. Home loan interest rates have gone up from 6.5% to around 8.75%. The pause will be welcome.

However, as emphasized by the RBI Governor, this pause may not be interpreted as the end of battle against inflation. While inflation is likely to soften, we are far from MPC’s eventual target of 4% headline CPI.

According to  Prithviraj Srinivas, Chief Economist at Axis Capital, "Given elevated inflation and resilient domestic demand, the bias is for further rate hikes in 2023. As soon as the MPC sees confidence that the world is not staring at another 'Lehmann-moment' or GFC, it will likely continue with further rate hikes to contain inflation”

RBI: Reserve Bank of India MPC: Monetary Policy Committee GFC: Global Financial Crisis
Add a Comment
Please login or register to post a comment.
© Copyright 2024 Morningstar, Inc. All rights reserved.
Terms of Use    Privacy Policy
© Copyright 2024 Morningstar, Inc. All rights reserved. Please read our Terms of Use above. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
As of December 1st, 2023, the ESG-related information, methodologies, tools, ratings, data and opinions contained or reflected herein are not directed to or intended for use or distribution to India-based clients or users and their distribution to Indian resident individuals or entities is not permitted, and Morningstar/Sustainalytics accepts no responsibility or liability whatsoever for the actions of third parties in this respect.
Company: Morningstar India Private Limited; Regd. Office: 9th floor, Platinum Technopark, Plot No. 17/18, Sector 30A, Vashi, Navi Mumbai – 400705, Maharashtra, India; CIN: U72300MH2004PTC245103; Telephone No.: +91-22-61217100; Fax No.: +91-22-61217200; Contact: Morningstar India Help Desk (e-mail: helpdesk.in@morningstar.com) in case of queries or grievances.