The rupee crashed below the 74-level against the U.S. dollar for the first time ever after the Reserve Bank kept its key policy rate unchanged. A section of banks have a day before the RBI announcement, hiked interest rates.
Taking all these factors into account, the committee predicted that both growth and inflation will continue well into 2019-20, where inflation is projected at a 4.8%, depending on a few domestic and global market forces.
"The RBI voting for a pause indicates that there is an attempt on its part to address the domestic macroeconomic fundamentals to tackle headwinds in the global market".
The Reserve Bank of India surprised observers today (October 5) by keeping its policy rate on hold in the face of growing imbalances and volatility in markets.
Mr Khoon Goh, head of Asia research at ANZ Banking Group in Singapore, said the mix of strong United States data and the Fed chair's comments bumped up the dollar and U.S. bond yields, putting downward pressure on Asian currencies. Bank Indonesia added 25 bps to its four previous hikes this year, bringing rates to 5.75 percent as expected, or 150 bps higher since May.
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It was up by 11.2 per cent from the prior quarter. "But in the longer run, it needs to grab more market share in handsets". Samsung is forecast to still book decent operating profit growth of 12 percent in the fourth quarter, Refinitiv data shows.
"While the MPC will look through the statistical impact of HRA revisions, there is need to be watchful for any second-round effects on inflation", the monetary policy committee said in its fourth bi-monthly policy statement.
So far this calendar year, the rupee has been Asia's worst performing currency as it has fallen nearly 15 per cent. "But, given the upside risks to inflation due to the rupee and fuel prices, six- -to-nine months ahead, we do expect a rate hike of at least 25 basis points".
The bank's guidance will be the key takeaway from the meeting. The projections of inflation for 2018-19 and Q1:2019-20 have been revised downwards from the August resolution. So, will we see them reversing the latest hike - or, will we see something akin to the RBI announcing a hike in rates?
Whether the aggressive policy move (if we get one at all) will eventually keep the rupee from losing further ground remains a perennial question given the lingering risks of a wider trade deficit from high oil imports and elevated inflation expectations.
Analysts said the rising oil prices are hampering growth and raising interest rates may be inevitable.
The country has not been immune to global spillovers from external factors, he said. "If crude prices continue to surge, then the RBI may have to come with front-loaded rate increases".