ADVERTISEMENT

RBI's MPC Preview — Expect To Hike Rates By 35 Bps; May Indicate Near Neutral Rates: Nirmal Bang

Persistently tight liquidity will not be consistent with the current stance of the RBI

<div class="paragraphs"><p>A Reserve Bank of India  namesign (Photo: Vijay Sartape Source BQ Prime).</p></div>
A Reserve Bank of India namesign (Photo: Vijay Sartape Source BQ Prime).

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy. 

Nirmal Bang Report

We expect the Reserve Bank of India’s Monetary Policy Committee to increase the repo rate by 35 basis points at its meeting on September 30. 

The Fed continuing to raise rates, domestic consumer price index inflation still hovering ~7% and high-frequency indicators continuing to signal steady growth momentum will support sustained rate hikes by the RBI.

With the repo rate expected to be ~5.75% and tightening domestic liquidity already beginning to put pressure on short-term rates, we expect the RBI to drop the line ‘focused on withdrawal of accommodation’.

It may also indicate ‘near neutral’ rates and opt for state-based guidance. However, the RBI will keep its options open given the aggressive stance adopted by the Fed.

In our view, persistently tight liquidity will not be consistent with the current stance of the RBI and hence it is likely to indicate its willingness to support liquidity through open market operations purchases, as and when the need arises.

Click on the attachment to read the full report:

Nirmal Bang Monetary Policy Committee Meeting Preview- Economy Update.pdf

DISCLAIMER

This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.