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RBI Monetary Policy Highlights: Repo rate hiked 50 bps to 5.9%; 2022-23 growth forecast cut to 7%

RBI Monetary Policy Meeting Highlights: RBI Governor Shaktikanta Das announced that the monetary policy committee (MPC) hiked the repo rate by 50 bps to 5.90 per cent and added that inflation is expected to remain elevated at around 6 per cent in second half of 2022-23. The central bank also cut growth forecast for the current financial year to 7 per cent. Here's what the Indian central bank chief announced.

rbi governor, shaktikanta dasRBI Governor Shaktikanta Das in Mumbai. (PTI Photo)

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) on Friday hiked the repo rate by 50 basis points (bps) to 5.90 per cent with immediate effect, RBI Governor Shaktikanta Das announced.

This is the fourth 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 and August. The market experts expected the MPC to raise the repo rate by 50 basis points (bps) in this meeting to tame the raging inflation and a falling rupee which hit an all-time low earlier this week following a strengthening of the dollar.

The retail inflation or Consumer Price Index (CPI), which the RBI factors in while considering its benchmark lending rate, stood at 7.00 per cent in August. Retail inflation has continued to remain above the central bank’s comfort level of 6 per cent since January this year.

The RBI governor further announced that the standing deposit facility (SDF) rate stands adjusted to 5.65 per cent and the marginal standing facility (MSF) rate and the Bank Rate to 6.15 per cent. He said that the MPC decided by a majority of 5 out of 6 members to remain focused on the withdrawal of accommodation to ensure that inflation remains within target going forward.

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In his speech today, Das said that the world is in midst of a third major shock from aggressive monetary tightening by central banks. He explained that there is nervousness in the financial market and the global economy is eye of new storm. He noted that the Indian economy continues to be resilient in midst of global turmoil.

Commenting on the inflation, Das said that the inflation trajectory remains clouded with uncertainties arising from continuing geopolitical tensions and nervous global financial market sentiments. “Today, inflation is hovering around 7 per cent and we expect it to remain elevated at around 6 per cent in second half of 2022-23,” he said.

Speaking about the GDP, Das said that while real GDP growth in Q1 turned out to be lower than our expectations, the late recovery in kharif sowing, the comfortable reservoir levels, improvement in capacity utilisation, buoyant bank credit expansion and the government’s continued thrust on capital expenditure are expected to support aggregate demand and output in the second half of 2022-23.

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The central bank cut the 2022-23 growth projection to 7 per cent from its previous estimate of 7.2 per cent. Das said that the real GDP growth for 2022-23 is projected at 7.0 per cent with Q2 at 6.3 per cent, Q3 at 4.6 per cent and Q4 at 4.6 per cent, with risks broadly balanced. While the growth for Q1 of 2023-24 is projected at 7.2 per cent.

How economists and market experts reacted:

 

 

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First published on: 30-09-2022 at 10:05 IST
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