The MPC next meets on June 6-8 where financial market analysts broadly expect rates to be raised by 35/40-75 bps.
Repo rate is likely to reach pre-pandemic level of 5.15% from the existing 4.4% by August, says a SBI report.
When interest rates go up, the interest burden of a home loan borrower would go up, and this needs to be compensated either by way of an increase in the tenure of the loan or an increase in the EMI.
While addressing shareholders recently, Warren Buffett, the 91-year old CEO of Berkshire Hathaway, gave a solution to beat inflation.
Realty, auto, bank stocks tumble after RBI's rate hike as experts predict quick actions against inflation
The 30-share BSE benchmark Sensex tumbled 1,306.96 points or 2.29 per cent to settle at 55,669.03. During the day, it plummeted 1,474.39 points or 2.58 per cent to 55,501.60.
While RBI decided to maintain status quo, it raised inflation forecast to 5.7 per cent for the current fiscal, up from its 4.5 per cent estimate in February.
Retail inflation surged to 6.95 per cent on yearly basis in March 2022 as compared to 6.07 per cent in February 2022 mainly on account of spiralling food prices.
The MPC was, however, mindful of risk of the hardening of crude oil prices, which the RBI sees as a major upside risk to the inflation outlook.
Repo was unchanged at 4 per cent and reverse repo at 3.35 per cent. Real GDP growth has been forecast at 7.8 per cent for FY23 versus The Economic Survey 's 8-8.5 per cent.
'Pandemic hold global economy hostage. India charting different course of recovery than rest of the world; to be fastest growing economy,' said Governor Shaktikanta Das.
The Feb 24 expiry Bank Nifty contract’s open positions declined by almost 6% as the contract rose 1.55%, a clear sign of short covering.
SBI group chief economist Soumya Kanti Ghosh also believes the time is “appropriate” for a 20 bps hike in reverse repo, but feels that could happen outside the MPC.
The SGBs offer an interest rate of 2.5% per annum on the amount of initial Investment, payable semi-annually.
Analysts also blame the surprising hike on the government borrowing announced in the budget for the RBI's likely call for policy normalisation.
However, in the overall easing cycle (Feb 2019 -Nov 2021), PSU banks have outperformed their private-sector peers in monetary policy transmission to individuals and businesses.