RBI Repo Rate Hike
The Reserve Bank of India hiked the repo rate, the rate at which RBI lends money to commercial banks by 50 bps again. Taking into account the prevailing adverse global environment, resilience in domestic economic activity and uncomfortably high inflation level, the policy repo rate was hiked by 50 bps to 5.40 per cent by RBI. This also brought about hikes in the Standing Deposit Facility (SDF) rate adjusted to 5.65 per cent and the Marginal Standing Facility (MSF) rate and the Bank Rate to 6.15 per cent. The Monetary Policy Committee (MPC) decided to remain focused on the withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth, stated RBI Governor Shaktikanta Das. The central bank’s growth projection for the Indian economy for 2022-23 is projected at 7.0 per cent with Q2 at 6.3 per cent; Q3 at 4.6 per cent; and Q4:2022-23 at 4.6 per cent. Here risks are claimed to have been broadly balanced. The growth for Q1 of 2023-24 is projected at 7.2 per cent. “Against the current challenging global environment, economic activity in India remains stable,” stated the RBI Governor. “While real GDP in the first quarter of this year turned out to be lower than expectations, it is perhaps the highest among major global economies”, he added. On inflation, he opined, the global geopolitical developments are weighing heavily on the domestic inflation trajectory, he said. The RBI Governor also stated that monetary policy has to carry forward its calibrated action on policy rates and liquidity conditions consistent with the evolving inflation growth dynamics. It must remain alert and nimble, he mentioned. Inflation inched up to 7.0 per cent in August from 6.7 per cent in July.