Kolkata, April 6: The Reserve Bank of India’s decision to keep key benchmark policy rate at 6.5 per cent is in line with expectations of the market, experts said on Thursday. The repo rate hike has been paused after six consecutive rate increases aggregating to 250 basis points since May 2022.
Bandhan Bank Chief Economist Siddhartha Sanyal said, “RBI’s pause on the repo rate is completely in line with our expectations.” In fact, “the 6-0 voting in favour of a pause reflects that,” he said. RBI Hikes Repo Rate To 6.5% to Tame India’s Inflation.
The six-member Monetary Policy Committee comprises three RBI officials and three external members appointed by the central government. With the likely softening of Consumer Price Index to low-to-mid five levels in the coming months, the real policy rate will hover around one per cent during the 2023-24 financial year, he said. RBI Monetary Policy Committee Meet 2023: Expect Reserve Bank of India to Pause Repo Rate Hike in February Policy, Says SBI Research.
Retail inflation in February stood at 6.44 per cent as compared to 6.52 per cent in the previous month. MPC takes into account retail inflation numbers for setting the interest rates.
However, inflation is expected to moderate in the current fiscal. Many institutions, including the World Bank and Asian Development Bank, have predicted that inflation would cool down to about 5 per cent this financial year. Announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das said the MPC will not hesitate to take action in the future.
The MPC’s decision to keep the repo rate unchanged is a “welcome” move, EECP India Chairman Arun Kumar Garodia said. The consistent hike in rates since May last year has made borrowing costlier, and the lagged impact of these hikes is expected to manifest in growth this year, he said.
Factors like high commodity prices, trade finance challenges, supply chain issues and monetary policy tightening have slowed down global economic growth and trade, which had also resulted in subdued demand from key markets for Indian engineering goods, Garodia added.
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