
The six-member monetary policy committee (MPC) - the interest rate-setting body of the Reserve Bank of India (RBI) - left the policy rate unchanged in its April review. All six members voted in favour of keeping the policy repurchase rate (repo) unchanged at 6.5%. On the contrary, the markets were expecting the repo rate to be hiked by a minimum of 25 basis points.
The repo rate is the interest rate at which banks borrow from the RBI during times of tight liquidity in exchange for government securities as collateral. This way liquidity is injected into the system at the repo rate. The repo rate influences all other interest rates in the system like banks’ lending and borrowing rates. It also influences yields on government and corporate bonds.
In the current interest rate tightening cycle, the MPC hiked the repo rate, which stood at 4% in May ’22 to 6.5% (250 basis points hike) now. While the quantum of rate hikes had begun to taper in the recent policy reviews, a pause in April was unexpected.
To point out, the MPC has the mandate to tame inflation at the 4% level with a band of 2% on either side. The MPC must also support economic growth, but targeting inflation remains the priority. A pause in repo rate hike signifies that the inflation is in a comfortable zone, while economic growth needs some monetary policy support.
Why has the MPC pressed the pause button? And what is the monetary policy outlook in the near-to-medium term?
IMPACT ASSESSMENT
After continuous repo rate hikes since May ’22, the time was right for the MPC to assess the outcome of the previous actions. Even though the repo rate was hiked by 250 basis points, bond markets, over the period, had factored in even larger policy rate hikes.
Denne historien er fra April 2023-utgaven av Beyond Market.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
Allerede abonnent ? Logg på
Denne historien er fra April 2023-utgaven av Beyond Market.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
Allerede abonnent? Logg på

THE REEL GAMECHANGER
AI is streamlining filmmaking - faster cuts, lower costs, and no drama (except on screen)

DODGING DIPS, CHASING PEAKS
MULTI-ASSET ALLOCATION FUNDS JUGGLE RISK AND REWARD, KEEPING PORTFOLIOS STEADY WHEN MARKETS WOBBLE AND SEIZING GAINS WHEN THEY RISE

MARGIN OF SAFETY: A SHIELD AGAINST MARKET MADNESS
Seth Klarman's Margin of Safety is a masterclass in investing wisely, where patience, independent thinking, and a margin of safety shield investors from market mayhem

BUDGET'S CONSUMPTION PIVOT
The Union Budget FY26 has set the stage for a transition from state-driven infrastructure spending to a model where rising household consumption would kick-start private capex cycle
MOUNTING CHALLENGES
India's economic momentum is slowing due to various factors, leading to a revision of growth estimates by IMF

IMPORTANT JARGON
A PRE-LISTING TRADING PLATFORM IN WORKS TO CURB GREY MARKET

CRACKING THE CREDIT SCORE CODE
Understanding how lenders decode credit scores can help shape loan terms and pave the way for smarter financial decisions

HYPE, HOPE, OR A SOLID BET?
NFOs open new investment opportunities, but careful evaluation is key to ensuring they align with both financial goals and market realities

SHRINKING MARGINS, RISING PRESSURES
Banks grapple with shrinking margins, deposit pressures, and lending shifts as the RBI resets interest rates

CLEAN WATER MEANS BIG BUSINESS
India's water treatment industry is making waves on the back of tighter regulations, green goals, and a growing thirst for wastewater recycling and ZLD solutions