- 7 Dec 2022
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In line with the market consensus, the RBI raised the repo rate by 35 bps to 6.25% and kept the policy stance unchanged to focus on the withdrawal of accommodation indicating further tightening ahead. On the growth front, the central bank revised its projection downwards from 7.0% to 6.8% owing to drags exerted by the external sector. Meanwhile, it retained its headline inflation projection at 6.7% for FY23. Additionally, on the liquidity management front, the governor cautioned the market participants to wean themselves away from liquidity hang. Overall, we assess the tone of today’s policy meeting to be still leaning towards hawkish. While we retain our view of the terminal rate being close to 6.5% by end of FY23, we do not rule out the possibility of a higher terminal rate in the context of resilient domestic economic activity and indication of higher rates in the developed world.
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