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The RBI has maintained today the repo rate unchanged at 6.5%. Photo: AFP
- Mumbai: Surprisingly, the RBI has maintained today its repo rate, the rate it lends to commercial banks, at 6.5%. Many analysts were expecting an increase in rates to counter the inflationary pressures resulting from high oil prices and the weakening of the rupee. The monetary policy panel has changed its position in favor of a "calibrated tightening" of "neutral". Five of the six panelists voted to keep the rate unchanged.
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15:01 IST RBI maintains GDP growth forecast for 2018-2019 at 7.4%Highlights of RBI's policy statement on growth prospects include:
1) Private consumption remained robust and should be sustained even though the recent rise in oil prices could have an impact on disposable income.
2) Improved capacity utilization, increased FDI inflows and increased financial resources in the business sector bode well for investment activities.
3) However, global and domestic financial conditions have tightened, which could hinder investment. Rising crude oil prices and other input costs can also weigh on investment activity by reducing corporate profit margins.
4) This negative impact will be mitigated to the extent that companies are able to pass on increases in their input costs. Uncertainty surrounds the export prospects. The slowdowns in the recent depreciation of the rupee could be mitigated by the slowdown in world trade and the escalation of the tariff war.
5) GDP growth forecast for 2018-19 is maintained at 7.4% -
14:46 IST The Rupiah breaks the $ 74 mark, Sensex down 500 points after the RBI policy announcementThe Sensex of BSE has lost more than 500 points, while Nifty has traded at 10,400. The rupee has reached a new low, above 74 US dollars, down from 0, 62% compared to its previous closing.
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14:30 IST RBI changes position to become "Calibrated Tightening"MPC votes 5: 1 for change of position in "Calibration of tightening". Regarding the position, Drs. Pami Dua, Chetan Ghate, Michael Debabrata Patra, Viral V. Acharya and Urjit R. Patel voted in favor of a change of position in favor of a calibrated tightening . Dr. Ravindra H. Dholakia voted in favor of maintaining the neutral position. The minutes of the CMP meeting will be published on October 19, 2018. The next PPC meeting will be held December 3-5, 2018.
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14:17 IST Fund managers get cash before RBI policy reviewFund managers increase their liquidity before the RBI decision, according to a Bloomberg report, pending an increase in the cost of borrowing. The RBI's comments on the outlook for inflation and economic expansion due to soaring oil prices and the weakening of the rupee will be closely monitored. "We have collected liquidity in our portfolios and our goal is to identify quality franchises that are close to cheap valuations, particularly in the consumer sector," said Sunil Sharma, head of $ 1 billion assets. as Director of Investments at Sanctum Wealth Management. Investors will also monitor whether the RBI will abandon its neutral stance in place since February 2017.
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1:44 pm IST What could be the impact of RBI's rate hike on borrowers?Many banks, including SBI and HDFC, had raised borrowers' interest rates a few days before the RBI policy review, which resulted in an increase in EMIs on home loans. A 25 basis point rise in the repo rate today, from 6.75% to RBI, would mean a rise of 75 basis points since June, the largest increase since the last tightening cycle, between September 2013 and January 2014. A majority of analysts expect an increase of a quarter point, Some analysts said that they would not be surprised if there was an increase 50 basis points, given the surge in oil prices and the decline in the rupee. The 10-year benchmark bond yield has risen 50 basis points to 8.20% since the last August policy meeting."The RBI is ready to keep real rates high because the political mandate is to anchor inflation," said Anindya Banerjee, assistant vice president, Kotak Securities' Currency Derivatives. "High real rates are the main pillar of the rupee policy. Increasing the repo rate will increase real interest rates and help attract new inflows of foreign capital, which will help contain the rupee. "
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1:30 pm IST Will RBI revise its inflation target?Analysts expect inflationary pressures to rise following the fall in the rupee and soaring world oil prices. The retail inflation rate was 3.69% in August, but is expected to exceed the 5% expected by the RBI by June 2019, due to higher fuel prices, weak fuel rupee and high consumer spending.
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1:25 pm IST IL & FS crisis and RBI liquidity infusionIL & FS debt problems have led to a sharp rise in short-term interest rates, with one-year commercial paper having risen nearly 70 basis points to 9.20% since early August, while one-year Treasury bill rate increased 50 basis points to 7.73%. Fearing a tightening of liquidity, the RBI unexpectedly introduced a major bond purchase program worth 34,000 crores of rupees for October, in addition to the 20,000 crore purchases made last month. According to a recent Bloomberg report, IL & FS has run out of new debt, even though the government is committed to avoiding further default. IL & FS failed to service principal and interest on loans from banks, inter-company deposits and commercial paper for a total of Rs 33.9 million due for the period from September 30 to October 4th.
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1:17 pm IST Will RBI maintain a neutral position?Analysts would closely follow the RBI's stance, which the central bank had maintained neutral, despite consecutive rate hikes in June and August. The next national trigger of the rupee would be the tone of the RBI's policy, said Abhishek Goenka, chief executive of IFA Global, before the announcement of the policy. RBI should "provide assurance on sustainable liquidity," predicted A. Prasanna, chief economist at ICICI Securities Primary Dealership. Radhika Rao, an economist at the DBS, expects a rate hike and the RBI's position to move from "neutral" to "hawk".
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1:10 pm IST Sensex at the forefront of the RBI policy reviewThe Sensex and the Nifty 50 were down sharply before the announcement of the RBI policy. The Sensex was down 469 points, while the Nifty 50 was trading at 10,421. The sale was widespread, as the MidCap and SmallCap BSE fell by 1.58% and 1.29%, respectively. The rupee was trading at 0.09% to 73.65 dollars, against 73.58 at the close on Thursday. Rising rates could make domestic debt yields more attractive to foreign investors and contain inflationary pressures resulting from high crude prices, as India imports more than two-thirds of its oil requirements. So far this year, the rupee has dropped more than 13%. Foreign investors sold $ 2.44 billion and $ 7.26 billion in equity and debt markets, respectively.
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