New Delhi: It may be a case of no choice. Soon after RBI’s MPC announced a repo rate hike after 4 years at a time of high crude prices, geo-political risks, global financial market volatility and threat of protectionism, the finance ministry said it welcomed the monetary policy of the banking regulator.
“Coming on the back of robust GDP growth, lower consumer inflation, strong GST collections and positive investor sentiment, I welcome RBI’s monetary policy which confirms that economic activity is on the upswing and expects a boost to investments from swift resolution of NPAs,” stand-in finance minister Piyush Goyal said.
Subhas Chandra Garg, secretary economic affairs said almost the same but with an underlying acceptance of hard facts leading to the hike coming as it after four long years.
“Welcome monetary policy statement. It is quite balanced assessment of growth, inflation and external situation and expectations. Rate hike is understandable, considering existing interest differentials and oil price movement. This should help in removing uncertainties and steadying markets,” said Garg.
On Wednesday RBI in its monetary policy announced a hike in repo rate by 25 basis points to 6.25 per cent, while keeping the stance neutral. Repo rate is the rate at which the central bank infuses liquidity in the banking system.
But this was not welcomed by the Street. The Indian rupee and 10-year bond prices on Wednesday erased all the morning gains after the RBI raised its benchmark interest rate for the first time since 2014.
The rupee was trading at 67.16 against the US dollar, down 0.02 per cent from its previous close of 67.15. The currency opened at 67.12 a dollar and touched a high and a low of 66.96 and 67.16, respectively.
The 10-year bond yield stood at 7.876 per cent from its Tuesday’s close of 7.834 per cent. Bond yields and prices move in opposite directions.
