The Reserve Bank of India Governor Shaktikanta Das said in a post-monetary policy press conference that 50 bps (hike) has become the new normal and a large number of central banks are now hiking by 75-to-100 bps.

“If you look all around, 50 bps (hike) has become the new normal and a large number of central banks are now hiking by 75-to-100 bps. So there is a tendency that 75-to-100 bps will take over 50 bps. But in RBI, we take a very calibrated and measured view. We factor in the impact of the rate action on the aspect of growth and on our consumer urban and rural demand. Based on that we have taken a balanced call. Based on the prevailing and expected inflation-growth dynamics,” said RBI Governor Shaktikanta Das.

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Addressing the media, RBI Governor said that the Indian economy is an island of growth and macroeconomic stability. There are signs that the CPI has peaked, and it is expected to moderate in Q4FY23 & Q1FY24.

He added, that inflation still remains at uncomfortably high levels and there are some uncertainties or outlooks for inflation. The RBI is bringing down excess liquidity in the system and the CAD is expected to remain within manageable limits.

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The RBI Governor on Friday announced that the Monetary Policy Committee voted unanimously to hike the benchmark interest rate by 50 basis points (bps) to 5.4% with immediate effect.  The Standing Deposit Facility (SDF) rate is adjusted to 5.15%. The Marginal Standing Facility (MSF) and bank rate are revised at 5.65%.   

It retained GDP growth projection at 7.2% for the current fiscal ending March 31, 2023, and kept the inflation outlook for the year unchanged at 6.7%.

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“Inflationary pressures are broad-based and core inflation remains elevated. Inflation is projected to remain above the upper tolerance level of 6 per cent through the first three quarters of 2022-23, entailing the risk of destablishing inflation expectations and triggering second-round effects,” said Governor Shaktikanta Das.