The Reserve Bank’s decision to maintain the benchmark interest rate is in line with expectations, and its focus on withdrawing the accommodative monetary stance will help reduce inflation while supporting growth, according to industry experts.
The central bank left its key interest rate unchanged as inflation remains a major risk, and signaled it would keep liquidity tight by using bond sales to bring prices closer to target.
The monetary policy committee kept the benchmark repurchase (repo) rate at 6.50 percent in a unanimous decision for the fourth consecutive meeting. He maintained the stance of “withdrawal from adaptation.”
Commenting on monetary policy, Subhrakant Panda, chairman of Ficci, said the RBI has kept the repo rate and overall stance unchanged, as largely expected, emphasizing the withdrawal of accommodation and support for the growth.
“Inflation needs to be monitored closely, but it appears to have peaked and a price correction appears likely in the near term,” he said.
Echoing similar sentiments, Madan Sabnavis, chief economist at Bank of Baroda, said the policy was going in the expected direction and the message seems to be that the status quo will prevail till the end of the fiscal year.
“This is based on inflation forecasts that remain almost unchanged,” he said, adding that the first time repo could be reduced is expected to be towards the end of the first quarter of next year.
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The Reserve Bank has kept the retail inflation projection at 5.4 per cent for the current fiscal year.
Commenting on the RBI’s latest decision, Rajeev Kapur, CEO, Steelbird Helmets, said that a stable buyback rate is a boon for the economy during this festive season as it translates into more purchasing power for the people.
“It fosters a sense of financial security, encouraging consumers to make confident purchasing decisions,” he added.
According to the RBI, domestic demand conditions are expected to benefit from sustained services dynamism, revival in rural demand, consumer and business optimism, government push on capital spending and balance sheets healthy banks and companies.
Headwinds from global factors such as geopolitical tensions, volatility in financial markets and energy prices, and climate shocks pose risks to growth prospects.
Ayush Lohia, CEO of Lohia Auto Industries, said the RBI’s decision provides a sense of stability in the broader economic picture.
For the electric vehicle industry, he said stable interest rates can positively impact the affordability and financing of electric vehicles, encouraging more consumers to switch to cleaner transportation options.
Shrinivas Rao, CEO of Vestian, said that even though headline inflation was outside the central bank’s comfort zone in July and August 2023, it maintained the status quo and kept the repo rate unchanged.
“This move shows the RBI’s confidence in the market and anticipation of moderate headline inflation in the future. We anticipate that both real estate demand and supply will maintain their current momentum on the back of stable market conditions,” it said.
According to Andromeda Loans and Apnapaisa.com CEO V Swaminathan, housing demand has remained resilient and so has demand for home loans.
“The status quo means demand for home loans will continue to grow at a faster pace and with the festive season just around the corner, we expect demand for home loans and auto loans to hit record levels during October-December 2023.” “, said. .
Suvodeep Rakshit, senior economist at Kotak Institutional Equities, said the RBI has explicitly highlighted the need to use OMO sales to modulate liquidity.
“This will affect sentiment in bond markets. Concerns over food inflation were highlighted, which may give a positive effect to overall inflation,” Rakshit said, adding that global monetary conditions will also influence policy decisions. from the RBI.
Amit Sarin, managing director of Anant Raj Ltd, welcomed the Reserve Bank’s move and said this will help the sustained recovery in economic growth that the country is witnessing.
“Needless to say, the real estate and housing sector will benefit from the decision. Demand for residential housing is expected to remain strong in the coming quarters,” he said.
In the opinion of Rohit Arora, CEO and co-founder of Biz2Credit and Biz2X, the RBI’s decision to keep the repo rate stable shows a strategic and balanced approach to India’s economic trajectory.
“It is a clear indication that regulators are in sync with market dynamics, paving the way for Indian fintechs to innovate, expand and contribute more significantly to the country’s financial inclusion,” he said.
Commenting on monetary policy, Rajiv Agarwal, MD & CEO, Essar Ports, opined that the decision to keep the repo rate unchanged for the fourth consecutive time reflects the RBI’s prudent approach to maintaining economic balance, while the outlook inflation rate of 5.4 percent underscores its dedication to price stability.
The Reserve Bank will announce the next bi-monthly monetary policy on December 8.