Audio discussion: Rate increase took market by 'surprise'

Manish Wadhawan, director and head of interest rates at HSBC has expressed his surprise at seeing a 0.5% increase in repo and reverse repo rates by the Reserve Bank of India. In this audio discussion, Wadhwan called said it was a’bold’ move by the central bank at a time when signs of a slowdown were clearly visible. He expects another 25 basis points hike before the central bank takes a pause.

He also states that monetary policy can play a limited role in taming inflation and the infrastructure bottle-neck needs to be addressed to get control over it.

Wadhawan, although not a corporate banker, believes that the impact of hikes in interest rates would be negative on the corporate sector. Companies have already reacted with dismay over the credit policy announcement as cost of borrowing goes up.

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