Decoding RBI’s Policy: Analysts’ On Future Rate Hikes & Volatility Outlook

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Decoding RBI’s Policy: Analysts’ On Future Rate Hikes & Volatility Outlook
Credit: © Reuters.

By Malvika Gurung

Investing.com -- The Reserve Bank of India’s MPC announced a 50 basis points rate hike on Friday, the third time in a row and stuck with its ‘Withdrawal of Accommodation’ stance, in efforts to arrest the sky-high inflation under the target 2-6% tolerance band.

Here’s how different analysts read the central bank’s monetary policy decisions.

Sandeep Bagla, CEO, TRUST Mutual Funds states that RBI has acknowledged the policy is still accommodative. He believes that rates need to hike more for reaching a neutral situation.

“Bond markets had already built in the 50 bp hike and are likely to remain range bound. In the medium term, inflation is likely to keep rates high,” Bagla added.

However, Sampath Reddy, Chief Investment Officer, Bajaj Allianz (ETR: ALVG ) Life Insurance believes that the RBI could be reaching the end of the rate-hike cycle in India, adding that future rate hikes will have more to do with supporting the Indian currency and also to some extent the inflation trajectory.

According to Vikas Garg, Head of Fixed Income, Invesco Mutual Fund, RBI retaining the ‘withdrawal of accommodation’ stance signals more future rate hikes.

“Overall, in line with market expectations as of now but we expect market volatility to remain high with a fast-evolving global backdrop,” he added.

Nilesh Shah, Group President & MD, Kotak Mahindra (NS: KTKM ) Asset Management Company addressed RBI’s announcement today as a “Mai Hoon Na” policy, as it balances on fine tightrope walking between inflation, growth and stability.

“Rapidly deteriorating global situation, a drawdown of systematic liquidity and FX reserves , inflationary pressure and growth concerns are testing the RBI,” Shah added.

Read Also: RBI Hikes Repo Rate by 50Bps; Bank Rate Figures & Das on Indian Economy

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