RBI rate hike a ‘win-win’ situation for markets, banks

TIL Desk/Business/Mumbai/ The Reserve Bank of India’s decision to raise the repo rate by 25 basis points to 6.50 per cent is a “win-win” situation for both markets and the banks as inflation is expected to rapidly decelerate to sub-5 per cent in coming months, suggests the report from the Economic Research Department of State Bank of India.

The report has been authored by Dr Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI. “The Monetary Policy Committee decided to increase repo rate by 25 bps (for the second time in a row) to 6.50 per cent by 5-1 vote and kept the stance neutral. RBI had to choose the timing of rate hike between now and later in the October 2018 policy.

However, RBI decided to walk the talk and the rate hike is a win-win situation for both markets and the banks as inflation is expected to rapidly decelerate to sub-5 per cent in coming months and it would have been difficult for RBI to hike then and convince the markets,” the SBI report suggested.