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RBI hiking repo rate by 50 bps is not surprising though our anticipation was 25-35 bps as we gave good amount of weightage to falling global commodity prices which was the key reason for rise in inflation at the first place due to geopolitical issues.
 
“Globalisation of inflation is coinciding with deglobalisation of trade”, this short statement by The Governor is summary of problems central bankers are going through. In such scenario, India’s strong economic outlook derived from broadening economic activity, normal monsoon, increased consumer spending, rise in production of capital goods has given comfort to MPC to increase benchmark rates by 50 bps.
 
This hike is continuation of withdrawal of accommodation which we believe is more or less done as repo rate is now what it was in September 2019 (pre-pandemic). We believe though Governor commented that change of 50 bps in rates is now new normal of the world, the upcoming policy decisions may not be of same quantum. Despite rise in interest rates RBI retaining the projection of growth rate at 7.2% should be the key takeaway for the market participants.