MUMBAI (Businesshala) – The Reserve Bank of India’s Monetary Policy Committee held interest rates steady at record levels on Friday as widely expected, but traders were asked to use its comments about inflation and liquidity normalization for further clues on the outlook. Waiting.
RBI’s prime lending rate or repo rate remained unchanged at 4%, while reverse repo rate or lending rate also remained unchanged at 3.35%.
All 60 economists polled by Businesshala said they did not expect any change in the repo or reverse rates, which have been held steady since May last year.
“We take comfort from the fact that the inflation trajectory is turning more favorable than anticipated,” Governor Shaktikanta Das said in a speech after the policy decision.
“Despite the global adversity, we look forward to emerging from the storm and moving towards normal times driven by the inherent resilience of the macroeconomic fundamentals of the Indian economy,” he said.
Economists polled by Businesshala this week said pandemic-related shutdowns threaten to further delay India’s economic recovery in the second half of this fiscal year. They expected inflation to remain high or accelerate, not fall.
The country’s coronavirus vaccination campaign has picked up pace and greenshoots are visible in various sectors, but consumer spending during the upcoming festive season will be crucial in determining the sustainability of the revival.
As of 0437 GMT, the NSE Nifty 50 index was up 0.61% at 17898.85 and the benchmark S&P BSE Sensex was up 0.60% at 60037.17. Following the verdict, the country’s benchmark 10-year bond yield fell to 6.28%, while the Indian rupee stood at 75.15 against the dollar.
With the recent variable rate reverse repo auction cut-off yield being set at a level above 3.35%, traders expect the reverse repo rate to be hiked sooner rather than later and await any timely clue from the speech. will do.
Market participants are also curious to know whether the central bank is considering exiting extraordinary liquidity support due to rising inflationary pressures, or if it continues to think these forces are temporary.
RBI has cut the repo rate by a total of 115 basis points (bps) from March 2020 to cushion the blow from the health crisis and strict containment measures. This follows a 135 bps price cut in rates from the beginning of 2019.