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RBI MPC Meeting Highlights: Inflation has peaked and will moderate, says Shaktikanta Das

RBI Monetary Policy Meeting Highlights: The six-member Monetary Policy Committee (MPC) headed by Reserve Bank of India (RBI) Governor Shaktikanta Das hiked the repo rate by 50 bps to 5.40 per cent. In the post-policy press conference, Das said that inflation has peaked and will moderate, but it is at unacceptably high levels. Here's what the Indian central bank chief announced.

RBI | Monetary Policy Committee | Shaktikanta Das | MPC | Repo RateRBI Governor Shaktikanta, MPC Meeting Live Updates, August 2022: RBI Governor Shaktikanta Das. (PTI Photo/File)

RBI MPC Monetary Policy Review Announcement Highlights: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) on Friday hiked the repo rate by 50 basis points (bps) to 5.40 per cent with immediate effect, RBI Governor Shaktikanta Das announced.

This is the third rate hike by the central bank in this financial year. Prior to this, the RBI had raised the repo rate – by 40 bps in an off-cycle meeting in May and 50 bps in June. The market experts expected the MPC to raise the repo rate by at least 35 basis points (bps) in this meeting.

The retail inflation or Consumer Price Index (CPI), which the RBI factors in while considering its benchmark lending rate, stood at 7.01 per cent in June. Retail inflation has continued to remain above the central bank’s comfort level of 6 per cent since January this year.

In his address, Das said that the MPC vote was unanimous and said that the MPC has decided to remain focused on withdrawal of the accommodative stance to check inflation. Additionally, he announced that the standing deposit facility (SDF) rate stands adjusted to 5.15 per cent and the marginal standing facility (MSF) rate and the Bank Rate to 5.65 per cent.

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In his speech today, Das said that the Indian economy has been grappling with high inflation and added that India has been facing a $13.3 billion capital outflow in the last few months.

He noted that the financial sector remains well capitalised and India’s forex reserves provide insurance against global spillovers.

Speaking on growth, Das said that the real GDP growth projection for 2022-23 is retained at 7.2 per cent with Q1 at 16.2 per cent, Q2 at 6.2 per cent, Q3 at 4.1 per cent and Q4 at 4.0 per cent with risks broadly balanced. However, he cautioned that there are risks from the ongoing Russia-Ukraine war.

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Designed by Shameen Alauddin/Indian Express

Speaking on inflation, the RBI governor said that retail inflation remains uncomfortably high and noted that inflation expected to remain above 6 per cent. He said that the inflation projection is retained at 6.7 per cent in 2022-23, with Q2 at 7.1 per cent; Q3 at 6.4 per cent; and Q4 at 5.8 per cent, and risks evenly balanced, on the assumption of a normal monsoon in 2022 and average crude oil price (Indian basket) of US$ 105 per barrel. The CPI inflation for Q1 of 2023-24 is projected at 5.0 per cent.

In the post-policy press conference, Das said that the Indian economy is an island of stability despite two black swan events and multiple shocks.

Speaking to reporters, the central bank chief said that inflation has peaked and will moderate, but it is at unacceptably high levels. Speaking on the current account deficit (CAD), Das said that CAD will be manageable and the RBI has the ability to manage the gap. Das said that the RBI has the ability to finance the CAD and added that the forex reserves remain strong and we will deal with excess volatility in the exchange rate.

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On being asked about the steep rate hikes, he said that a 50 bps hike is the new normal and global central banks have recently raised their respective interest rates by 75-100 bps. He noted that monetary policy will be calibrated, measured and nimble from here on.

How economists and market experts reacted:

 

 

 

 

First published on: 05-08-2022 at 09:50:34 am
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