RBI Governor Shaktikanta Das on Wednesday announced a 50 basis point hike in repo rate to 4.9 percent. The central bank had earlier announced an unexpected rate hike of 40 basis points last month.

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While admitting that the inflation has been bigger and has risen faster than what RBI had estimated in April and May, the central bank governor said that it will remain higher than 6 percent till December 2022 mainly due to elevated food prices.

Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank, complemented the central bank on being realistic in its inflation projection.

Meanwhile, Neeraj Gambhir, President and Head Treasury & Markets, Axis Bank pointed out that the MPC's moves will slowly remove the excess liquidity in the system.

The RBI's Monetary Policy Committee (MPC) voted unanimously in favour of raising the repo rate to tame inflation and move away from its earlier pandemic-induced ‘accommodative’ stance.

Meanwhile, Indranil Pan, Chief Economist, Yes Bank, is viewing RBI's change in stance differently.

“This is almost equivalent to saying that we are more neutral than before. So that's one thing that I would take from the stance. And second, anyway, the action is clear that they will want to take away the pandemic related accommodation that was there - that is the first objective for the Reserve Bank of India and after that, the judgment will come in terms of any incremental tightening," he said.

Meanwhile, Amandeep Chopra, Group President, Head of Fixed Income at UTI MF, said that the no CRR (cash reserve ratio) hike was a big positive for the market.

Also, S K Ghosh, Group Chief Economic Advisor to SBI, said, "MSP hike for the Kharif crops, there will be an upside pressure of 15 to 20 bps on inflation."

So, is growth on the back burner? Governor Das repeatedly said that it was not so and the MPC also has maintained its growth projection for the current financial year at 7.2 percent.

(Edited by : Abhishek Jha)

First Published:Jun 8, 2022 7:21 PM IST