EXPERTS: MOVE TO SUPPORT GROWTH

New Delhi, Oct. 5: The Reserve Bank wants to support the growth by keeping the key repo rate unchanged at 6.50 per cent, as announced in policy review on Friday, experts said.

The RBI’s policy will provide a short- term relief in the rupee and debt market, they added.

However, they have not ruled out a hike in the policy rate going forward, as in the previous two consecutive instances the RBI had raised the repo rate by 0.25 per cent each.

The Monetary Policy Committee also changed the stance from neutral to calibrated tightening by a majority 5: 1.

The intent of the RBI’s policy sends signals for supporting growth in the near- term while the policy action is expected to alleviate the liquidity concerns amongst the market participants, Bank of India MD and CEO Dinabandhu Mohapatra said. “RBI has reiterated its commitment to manage inflation at 4 per cent level, while taking care of real economy growth at the same time. The move shows the RBI's view on softened retail inflation in recent months,” he said.

The move is also seen as surprising as it was widely expected that the RBI may raise the repo rate by 0.25 per cent or even by 0.50 per cent due to ongoing concerns on falling rupee and rising crude oil prices.

“A surprising status quo from RBI amplifies its higher accordance to imparting and restoring financial stability in the near term in the economy. As such, with a shift of stance from neutral to calibrated tightening, we believe that RBI is likely to re- commence rate hiking from the forthcoming policy in December,” said Shubhada Rao, chief economist, Yes Bank.