Shaktikanta Das, the Governor of the Reserve Bank of India, made key announcements about India’s monetary policies. He addressed areas like inflation, repo rates, Cash Reserve Ratio, and foreign exchange reserves among others.
Here are the key announcements made by the RBI Governor on Wednesday:
-Shortages, volatility in commodities and financial markets are becoming more acute.
– The benchmark interest rate will be hiked by 40 basis points to 4.40% in an unscheduled policy review with a view to contain inflation in the country. The spike in interest rates will aim to “strengthen and consolidate” medium-term economic growth prospects.
-RBI Governor Das said that current geopolitical tensions are pushing India’s inflation. He added that global economic recovery is losing momentum.
-India’s foreign exchange reserves currently remain high and are valued at nearly $600 billion. The RBI Governor also said that India’s debt-to-GDP ratio remains low.
-India’s cash reserve ratio (CRR) was spiked by 50 basis points and will be at 4.5% starting May 21, 2022.
The decision to increase interest rates was taken by the Monetary Policy Committee (MPC), the RBI Governor announced. This was the first rate hike in India since August 2018.
The unscheduled meeting saw all six members voting unanimously for a rate hike while maintaining an accommodative stance.
While the inflation has remained above the targetted 6% since January, RBI Governor Shaktikanta Das said the inflation print in April is also likely to be high, according to reports from PTI.
The retail inflation print for March stood at 6.9%.
The Governor said the decision of MPC reversed the May 2020 interest rate cut by an equal amount.
Shaktikanta Das said the last time India revised its repo rate policy was at the onset of the COVID-19 pandemic, on May 22, 2020. It was revised in an off-policy cycle to spike demand. This was achieved by slashing interest rates to a historic low of 4%.