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RBI hikes repo rate by 50 basis points to 5.90%
- The RBI hiked the repo rate by 50 basis points to 5.9%
- This is the RBI's fourth straight hike since it started tightening monetary policy
- The Standing Deposit Facility (SDF) rate stands adjusted at 5.65%
The Reserve Bank of India (RBI) hiked the key interest rate, the repo rate, by half a percentage point or 50 basis points in its policy review on Friday. This is the RBI’s fourth straight hike since it started tightening monetary policy earlier this year. The monetary policy committee remains focused on withdrawal of accommodation to ensure that inflation remains within target while supporting growth, said RBI Governor Shaktikanta Das.
The Standing Deposit Facility (SDF) rate stands adjusted at 5.65%. The Marginal Standing Facility (MSF) and bank rate are revised at 5.9%.
After two shocks of coronavirus pandemic and the conflict in Ukraine, now we are in the midst of another shock, a storm, arising from aggressive monetary policies by the global central banks, Das said.
Also Read | Why interest rates are being hiked globally?
Nervous investor sentiments have triggered a flight to safety, he added.
The US dollar has reached a new high. Emerging market economies are confronted with challenges of slowing global growth, elevated food and energy prices, spillovers from advanced economy policies, debt distress and sharp depreciation, Das said. All segments of the financial markets are in turmoil globally.
Also Read | RBI monetary policy committee meet: An overview
“Indian economy remains resilient despite global headwinds wherein global recession fears are mounting, inflation high,” said Shaktikanta Das.
The RBI has lowered the real gross domestic product (GDP) growth forecast for FY23 to 7% from 7.2%. The GDP growth is seen at 6.3% in Q2 FY23 and 4.6% in Q3 FY23 and 4.6% in Q4 FY23.
The recent correction in global commodity prices if sustained may ease cost pressures in coming months. Today inflation is hovering around 7% and we expect it to remain elevated at 6% in the second half of the year, said the RBI Governor. For the full financial year, India’s inflation rate is seen at 6.7%.
Also Read | Explained: Impact of RBI’s repo rate hike on deposits, loans
He added that Rupee is a freely floating currency. RBI doesn’t have fixed exchange rate in mind. The central bank intervenes to adjust volatility in market. “Intervention in FX market based on evolving situation, and the forward guidance may destabilize capital markets,” Das said.
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