RBI Governor Shaktikanta Das on Friday announced that the central bank’s Monetary Policy Committee (MPC) has hiked the repo rate – or the key lending rate – by 50 basis points (bps) to a three-year high of 5.9 per cent.
“The global economy is in eye of storm but India has withstood shocks over the last two years,” RBI governor said. Inflation is hovering around 7 per cent and is expected to remain around 6 per cent in the second half of the year.
“The inflation rate is projected at 6.7 per cent,” he said. “The MPC has to remain alert and nimble, eyeing the current conditions.” The GDP grew by 13.5 per cent year-on-year in the first quarter, he highlighted.
Ahead of the statement, markets opened in red with Sensex at 56,254. The National Stock Exchange (NSE) Nifty 50 index was down 0.3 per cent at 16,776. A Reuters poll showed a slim majority of economists – ahead of the statement – were expecting a 50 basis point hike and some others expected a smaller 35 basis point rise.
Last month, the Monetary Policy Committee (MPC) of the RBI had announced an increase of the repo rate by another 50 basis points – one basis point is one hundredth of a percentage point taking it to 5.4%, a level last seen in September 2019. It was the third consecutive rate hike by the MPC since its unscheduled May 2022 meeting, HT had reported.
The key committee had also retained its inflation and GDP growth projection for the fiscal year 2022-23 at 6.7 per cent and 7.2 per cent, respectively.
The MPC, since May, has already raised the key policy rate by 140 bps to 5.4 per cent to cool off domestic retail inflation, which has stayed above the RBI’s upper tolerance limit of 6 per cent since January.
(With inputs from Reuters)