RBI Move in Line With Market Consensus: Arun Srinivasan.

RBI noted the downside risks to domestic growth on account of global developments. In the light of weak global demand, RBI noted that domestic exports may slow down in coming quarters.

In line with market consensus, the Reserve Bank of India (RBI) hiked the Repo rate by 25 basis points from 8% to 8.25%. The Reverse Repo rate and Marginal Standing Facility (MSF) rate automatically stand adjusted to 7.25% and 9.25% respectively.

RBI noted the downside risks to domestic growth on account of global developments. In the light of weak global demand, RBI noted that domestic exports may slow down in coming quarters.

However, having acknowledged the downside risks to growth, RBI stressed that it will continue with its anti-inflationary stance till the headline inflation is seen taking a downward trend. RBI noted that inflation still remains suppressed on account of incomplete pass through of global oil prices and electricity prices.

RBI also noted that despite normal monsoon, food prices remain near double digits owing to structural supply - demand imbalances. Contrary to market expectations, RBI did not lighten its hawkish stance in this policy and reiterated that future policy actions will be primarily driven by inflation trajectory.

Source : indiainfoline.com