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The Reserve Bank of India's (RBI) Monetary Policy Committee's (MPC) action to hike the repo rate by 35 basis points (bps) to 6.25 per cent has got the following reactions from experts:

Deepak Agrawal, Chief Investment Officer, Debt Fund, Kotak Mahindra Asset Management Company

The RBI hikes repo rate by 35 bps in line with market expectation with a 5:1 vote. The stance was maintained at "withdrawal of accommodation" with a 4:2 vote. The MPC was of the view that further calibration action is warranted to keep inflation expectation anchored, to break core inflation persistence and contain a second round effect.

Inflation projection for FY23 is maintained at 6.7 per cent and H1 FY24 is pegged at 5.2 per cent. Real GDP for FY23 is pegged lower from 7 per cent to 6.8 per cent. We continue to expect a terminal repo rate of 6.5 per cent in this rate cycle.

Shishir Baijal, Chairman & Managing Director, Knight Frank India

The RBI's move is a balanced approach towards continued economic growth despite the higher than tolerance level of inflation. This hike in the repo was within expectation as the inflation has reduced and is expected to further reduce in the next few quarters, while the concern around domestic economic growth emerges amidst the current global vulnerabilities.

Since the rate hike cycle in May 2022, home loan products have become expensive by around 150 bps before today's hike. The lending rates have risen significantly, especially for the loans linked to External Benchmark based Lending Rate (EBLR) where there has been a 100 per cent transmission of repo rate. Loan products linked to MCLR rates are also up by around 108 bps during this period.

This hike will further impact EMIs and reduce home affordability.

Simply based on the interest rate impact in this rate cycle, the Knight Frank Affordability Index has recorded a cumulative deterioration of an average of 3 per cent across the country. However, as we have seen since the beginning of the rate hike cycle, latent demand has sustained, albeit with some moderation, in cumulative housing sales since the beginning of the rate hike cycle. The 35-bps rate hike by the RBI may be considered moderate in the current context and therefore considered a welcome move.

Nilesh Shah, Managing Director, Kotak Mahindra Asset Management Company

The RBI has given a "Main Hoon Na" (we are there) policy, reassuring the market.

In a world where central banks are fighting to regain credibility, the RBI stands tall managing conflicting objectives of growth and inflation admirably.

A data-driven RBI will keep on playing balls on merit and continue to keep the growth score board moving with inflation under check."

Suman Chowdhury, Chief Analytical Officer, Acuite Ratings & Research

The RBI has hiked the repo rate by 35 bps to 6.25 per cent in the last MPC meeting of the current year, completely in line with market consensus and our forecasts. We believe that RBI's stance has remained moderately hawkish with the continuation of its stance of "withdraw al of accommodation" which implies that further rate hikes may take place in the upcoming policy meets if the inflation print continues to be above RBI's expectations.

Essentially, the MPC has kept faith in the resilience of the domestic economy and has only marginally revised its GDP growth forecast to 6.8 per cent in FY23 despite the increased global headwinds.

On the other hand, RBI remains cautious about the headline inflation print and will keep an "Arjuna's eye" on it, highlighting its intent to bring it sustainably down to below 6 per cent within the next two quarters. This opens up the possibility of a further round of rate hikes in Feb 2023 and a potential terminal rate of 6.5 per cent by the beginning of FY24. RBI has also made it clear that liquidity calibration will continue to take place and market participants have to get used to a lower level of liquidity surplus in the system.

Acuite expects a further rise in bank deposit rates over the next two quarters to the extent of 50-100 bps given the narrative from MPC and the continuing momentum in credit growth. The pass-through of higher rates to home loans may start to impact the demand for housing, particularly in the mid to high ticket segment.

Madhavi Arora, Lead Economist, Emkay Global Financial Services

The MPC expectedly delivered a 35 bps hike with 5-1 vote and kept its stance unchanged at "withdrawal of accommodation. The tone was still cautious and data dependent, and with the RBI Governor emphasizing the need to calibrate the policy. The governor again highlighted the stickiness of core inflation, the risk that sustained high inflation could unmoor inflation expectations and lead to second-round effects in the medium term.

A 35 bps hike today implies the ex-post real rates still sub 1 per cent -- RBI's estimated real neutral rate, keeping 6-month ahead inflation as an anchor (a more certain trajectory vs one-year ahead), which may imply more space for another shallow hike of up to 25 bps to reach a neutral rate (albeit not necessarily implying end of cycle).

At this point, we still think that the RBI would not turn too restrictive; however, the extent of global disruption will remain key.