Thursday, September 16, 2010

RBI hikes repo by 25 bps; reverse repo by 50 bps

The Reserve Bank of India (RBI), in its credit policy announcement today, hiked repo by 25 basis points (bps) and the reverse repo by 50 basis points (bps). The repo now stands at 6% while reverse repo stands at 5%.

A poll conducted earlier in the day had indicated that most people had expected a 25 bps hike on the reverse repo rate. In fact, 60% expected a 25 bps hike in repo rate and 40% expected the rate to remain unchanged. The 50 bps reverse repo hike may have come in as a surprise. 90% of experts polled had expected a 25 bps hike in the reverse repo rate and 10% expected RBI to keep the rate unchanged.

The poll suggested that the market was most keenly watching out for the language of the RBI. "A lot of people expect that whether or not the RBI signals a rate hike, it will start talking a little more neutral as compared to the hawkish view it had in the July policy," As soon as the announcement was made, the benchmark indices remained largely unchanged.

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4 comments:

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