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Policy doesn’t go down well with markets; rupee takes a hit
Ahead of the festival season, consumers have been spared the burden of another increase in their EMIs (equated monthly instalments), thanks to the Reserve Bank of India holding its key rate unchanged at 6.5% in its policy review announced on Friday. However, the central bank changed its stance from neutral to calibrated tightening, indicating that there was no possibility of a cut in rates in the near future. The policy did not go down well with the markets, which were expecting a hike in interest rates and measures to support the embattled rupee and non-banking finance companies. The rupee breached the 74-mark against the dollar to touch 74.22, before closing the day at 73.76, down 18 paise or 0.24% from its previous close. Rate hike was expected after the U.S. Fed raised rates last month and because the rupee had been under pressure. But RBI’s decision seems to indicate it was more worried over liquidity and hardening of bond yields than inflation. It lowered its forecast for consumer inflation. “The depreciation of the rupee has been in some respects moderate in comparison to several other EME [emerging market] peers,” Urjit Patel, RBI Governor, said.
Source : https://www.thehindu.com/todays-paper/rbi-holds-key-rate-averts-emi-hike/article25139695.ece
