Repo Rates Increase: Finance Minister Sitharaman said this big thing, know why there was an increase

Finance Minister Nirmala Sitharaman said the Reserve Bank’s recent interest rate hike was not surprising, but the timing was, and that the rising cost of money will not affect the government’s planned infrastructure spending.

The Reserve Bank of India’s Governor, Shaktikanta Das, announced on Wednesday that the central bank’s Monetary Policy Committee (MPC) raised the repo rate by 40 basis points (bps) to 4.40 percent with immediate effect during an off-cycle meeting.

Retail inflation was 6.9 percent in March, and the April number is expected to be 7.7 percent.

“The timing of the RBI’s rate hike surprised people, but not the action itself, because it was expected.” It was unexpected because it fell between two MPC (Monetary Policy Committee) meetings. But the US Fed had been saying it all along,” Ms. Sitharaman remarked in her initial reaction to the rate hike while speaking at an event in Mumbai on Saturday evening.

“In some ways, it was a coordinated action.” Australia did it, and the United States did it the next night. As a result, I see a deeper understanding among central banks these days. However, India’s grasp of how to deal with pandemic recovery is not entirely unique or usual. It’s a worldwide problem.”

“And even as we dealt with that recovery, inflation was really festering, and festering at some amazing highs, let us say in the United States and Britain, but not so much in our country…

“However, the dilemma of recovery versus inflation appears to be following a particular formula that is already widespread,” she said.

The repo rate is the rate at which the central bank lends banks short-term money. Since February 2019, the RBI has lowered the repo rate by 250 basis points to help recover the growth momentum. The Monetary Policy Committee has been accommodative for a long time in order to boost growth.

In addition, the case reserve ratio has been increased by 50 basis points to 4.5 percent.

Concerning the economic sanctions imposed on Russia following its invasion of Ukraine, she stated that the blockades were “restraining us,” as traditional Russian purchasers were changing to supplies from the Indian basket of oil, 80-85 percent of which came from the Middle East. This change was expected to put more pressure on the Indian crude basket price.