August 8, 2022

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RBI Hikes Repo Rate By 50 BPS, Higher Than Our, Market Expectations: Motilal Oswal

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The Reserve Bank of India, on August 05, 2022, hiked the policy repo rate by 50 basis points to 5.4%. Consequently, the standing deposit facility now stands at 5.15% and the marginal standing facility/bank rate stands at 5.65%.

The hike was both above market expectation of 35bp (to 5.25%) and our assumption of 25 bps (to 5.15%).

This is the third repo rate action by the RBI in FY23 to date. Cumulatively, the RBI has hiked repo rate by 140 bps (excluding the 40 bps hike on SDF in April 2022) in two scheduled and one out-of-turn policy meetings since May 2022.

The MPC reiterated its continued focus on ‘withdrawal of accommodation’ to contain inflation while supporting growth. The decision on rate hike was unanimous, while Dr. Jayanth Varma expressed reservations on the stance.

However, the RBI kept its inflation/growth forecasts unchanged at 6.7%/7.2% YoY, respectively, for FY23.

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Motilal Oswal Financial Services
2022-08-06 08:55:22

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