Analysts at TDS point out that the RBI surprised by hiking the repo and reverse repo rate by 25bps to 6.25% and 6.00%, respectively, yesterday.
Key Quotes
“While we had anticipated that today’s decision was likely to be a ‘hawkish hold,’ and had expected at least one more MPC member to vote for tightening today, compared to the 5 April meeting, when only one member dissented voting for +25bps, the early RBI move remains somewhat surprising. Amongst the reasons for hiking rates, “the firming up” in the inflation projections for FY2018/19 (up to 4.8-4.9% in H1, to then ease somewhat to 4.7% in H2) on account of higher crude oil and other global commodity prices suggested an early move. Despite a unanimous vote to hike, the MPC maintained its “neutral stance” of monetary policy.”
“The rupee initially reacted with some unsurprising strengthening; which was then pared back completely and reversed; finally, INR started strengthening again. At the time of writing, INR is approximately 0.2% stronger to the USD vs pre-announcement levels.”
Share
