The sudden repo rate pause by the central bank has left investors wondering what caused the surprise move. Let’s decode the reason behind it.
‘RBI’s MPC has decided to keep the benchmark repo rate unchanged.’- This statement came as a shocker, and analysts were caught off guard, as most of them had predicted that the RBI would hike the rate one more time before taking a break.
But, the governor then mentioned that they believe their stance reflects accommodation, and the MPC will not hesitate to take further action as may be required in future meetings.
So, what led to this sudden change in plans?
Well, the RBI is keeping a close eye on some significant global events, such as bank failures in the US and Europe, and their potential ripple effects.
Moreover, the RBI’s pause was also made possible because the US Federal Reserve recently shifted its hawkish stance on rate hikes. This change has given RBI more room to decide carefully on India’s monetary policy.
On top of that, the weakness of the US dollar might also have played a crucial role in the RBI’s decision.
The RBI’s primary focus is ensuring that inflation aligns with its target while supporting economic growth. It’s a delicate balancing act, but the RBI is determined to get it right. So, while the wait-and-watch approach may have come as a surprise, the RBI has made it clear that it is all a part of their plan to navigate the turbulent waters of the global financial system.
Few Critical Takeaways From The MPC Meeting
- The repo rate is kept unchanged at 6.5%.
- The decision to hold off on raising rates applies only to this meeting.
- Although there has been a decline in inflation, it continues to exceed the tolerance level.
- India’s economy continues to demonstrate resilience, with an anticipated real GDP growth of 7% in FY23.
- The GDP growth projection for FY24 is 6.5%, assuming oil price decrease.
- The RBI plans to create an online portal for unclaimed deposits across all banks. The portal will cover deposits that are at least ten years old.
After the MPC meeting, the government bond yields have taken a deep dive, plunging to depths not seen in nearly seven months! The 10-year benchmark bond yield, which was 7.28% before the decision, tumbled to 7.14%, its lowest level since September 15, 2022.
Apart from this, home buyers, who have been feeling the pinch of aggressive rate hikes, can finally breathe a sigh of relief. With no changes in policy rates, the interest rates on home loans would stay stable for a while.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!