That’s what almost everyone felt today; it was almost a foregone conclusion that RBI would hike rates by at least 25 bps. But RBI today stayed put on the rates; it’s a status quo!
And RBI also said that it has decided to stay the course on its accommodative stance "as long as necessary.”
So what we have now:
The repo rate is unchanged at 4%
Reverse repo rate is also unchanged at 3.35%
The market’s immediate reaction was a surge from an around 70 points fall to almost a 144 points jump up.
RBI did not seem too worried about the inflation which explains the status quo. The Governor said that though inflation has gone up, it remains very much on anticipated lines. The large buffer stocks of cereals and effective supply side measures augur well though the renewed surge in crude oil prices is a concern. RBI said that core inflation remains elevated and headline inflation is expected to peak in Q4FY22, and turn moderate in H2FY23.
On this thread, RBI remained status quo on the CPI front, pegging it at 4.5% for 2022-23, with Q1Fy23 at 4.9%, Q2 at 5%, Q3 at 4% and Q4 at 4.2%.
The real GDP growth has been projected at 7.8% for FY23 of which Q1 is estimated at 17.2%, Q2 at 7%, Q3 at 4.3% and Q4 at 4.5%.
RBI said that this status quo is an attempt to limit disruption to economic activity, saying that continued policy support is warranted for durable, broad-based recovery.
Though rates were held steady, the RBI made changes to liquidity management wherein:
Variable rate repo operations of varying tenors will henceforth be conducted as warranted by liquidity conditions.
Variable rate repo and variable rate reverse repo auctions of 14-day tenors will operate as the main liquidity management tool, supported by fine-tuning operations.
Auctions of longer tenors will be conducted as needed. From March 1, fixed rate reverse repo and marginal standing facility windows will be available only between 5.30 pm to 11:59 pm on all days.
RBI also announced that it has enhanced the cap on e-rupee vouchers from Rs 10,000 to Rs 1 lakh. These vouchers can now be used more than once.