RBI hikes repo rate by 50 bps, GDP forecast retained at 7.2%

In early May, the RBI, in a surprise off-cycle meeting, hiked the repo rate by 40 basis points (bps) to 4.40 percent, amidst rising inflation concerns in the economy

PGurus Newsdesk

June 8, 2022

In early May, the RBI, in a surprise off-cycle meeting, hiked the repo rate by 40 basis points (bps) to 4.40 percent, amidst rising inflation concerns in the economy

RBI raises repo rate for the second time in 5 weeks

At the conclusion of the monetary policy committee‘s three-day meeting on June 8, the Reserve Bank of India (RBI) raised the repo rate by 50 basis points, an increase for the second time in five weeks.

Earlier, the monetary policy committee (MPC) had held an unscheduled meeting in early May and voted unanimously for a 40 basis point repo rate hike in anticipation of a huge increase in April inflation. The repo is the rate at which the RBI lends short-term funds to banks.

Governor Shaktikanta Das said that inflation was likely to remain above the upper tolerance level for three quarters of this financial year.

Though the RBI raising policy rates in the ongoing monetary policy committee meeting was a “no brainer“, as said by its Governor Shaktikanta Das in a recent interview, investors, however, awaited the actual degree of percentage hike before taking fresh positions and future course of action in the financial markets.

India’s retail inflation accelerated to 7.79 percent in April, remaining above the tolerance limit of the Central Bank, RBI for the fourth month in a row. It is highly likely that the retail inflation will remain above 6 percent for another few months.

Das on Wednesday categorically said India’s retail inflation is likely to stay above the tolerance level till the third quarter of FY23 before moderating below 6 percent.

For FY23, RBI sees overall inflation at 6.7 percent, with 7.5 percent in Q1, 7.4 percent in Q2, 6.2 percent in Q3, and 5.8 percent in Q4, taking into consideration the normal monsoon and average crude oil basket price of $105 per barrel.

Notably, wholesale inflation in the country has been on double-digit for over a year now.

Coming to growth, India’s real GDP growth in FY23 is seen at 7.2 percent, will be 16.2 percent in Q1, 6.2 percent in Q2, 4.1 in Q3, and 4.0 in Q4, with risks broadly balanced, Das said.

[With Inputs from IANS]

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