RBI hikes Repo Rate by 50 basis points

The Monetary Policy Committee of the Reserve Bank of India, which met from 6-8 June 2022, has unanimously decided to hike the Repo Rate by 50 basis points to 4.90 % with quick effect in its stance on reversing the excessive accommodation that was required to deal with the pandemic’s consequences.

Consequently, Standing Deposit Facility Rate stands adjusted to 4.65% and the Marginal Standing Facility rate and Bank Rate to 5.15%.

The MPC also decided to remain focused on the withdrawal of accommodation to ensure that inflation remains within the target going forward while supporting growth.

He stated the real GDP growth rate for 2022-23 has been kept at 7.2 percent, with 16.2 percent in Q1, 6.2 percent in Q2, 4.1 percent in Q3, and 4.0 percent in Q4, with risks broadly balanced.

With a typical monsoon in 2022 and an average crude oil price (Indian basket) of US$ 105 per barrel, inflation in 2022-23 is now expected to be 6.7 percent, with Q1 at 7.5 percent, Q2 at 7.4 percent, Q3 at 6.2 percent, and Q4 at 5.8 percent, with risks evenly balanced.

The food group is responsible for over 75% of the increase in inflation estimates. Furthermore, he added, the baseline inflation prediction of 6.7 percent for 2022-23 does not account for the impact of current monetary policy activities.

Headline inflation climbed by around 170 basis points between February and April.

“With no end in sight to the war and upside risks to inflation, prudent monetary policy measures would ensure that the economy’s second-round effects of supply side shocks are contained, long-term inflation expectations are firmly anchored, and inflation gradually aligns closer to the target,” he said.

Repo rate hiked for the second time in 5 weeks

After a three-day meeting of the Monetary Policy Committee on June 8, the Reserve Bank of India (RBI) adjusted the repo rate for the second time in five weeks. Let us remind you that the RBI abruptly raised the repo rate by 0.40 basis points last month on May 4, 2002. The repo rate was increased by 50 basis points by the same RBI after 5 weeks, on June 8, 2022. The repo rate has changed.

Retail inflation expected to be 7.5 percent in May-June

Retail inflation is expected to reach 7.5 percent in the late April-June quarter, according to the RBI. Inflation in the retail sector is predicted to be 7.4% in the second quarter. This rate might be 6.2 percent in the third quarter of FY 2022. Retail inflation is expected to reach 5.8% in the fourth quarter.

According to estimates issued by the National Statistics Office on May 31, India’s GDP growth rate will be 8.7% in the fiscal year 2021-22, according to RBI Governor Shaktikanta Das. The real GDP in the financial year 2021-22, on the other hand, is higher than the level of the epidemic in the previous year, i.e. 2019-20.

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