RBI MPC: Repo Rate Hiked By 50 bps; Inflation Forecast For FY23 Revised Upwards To 6.7%
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The Monetary Policy Committee of the Reserve Bank of India unanimously resolved on Wednesday to raise the repo rate by 50 basis points to 4.90 per cent, focusing on the removal of accommodation. The central bank has raised its retail inflation forecast to 6.7 per cent, up from 5.7 per cent, while keeping the FY23 GDP forecast at 7.2 per cent.
In a statement to the media, RBI Governor Shaktikanta Das said that food and commodity prices are still high, that the Russia-Ukraine conflict has resulted in the globalisation of inflation, and that central banks around the world are reorienting their policies.
The Reserve Bank of India (RBI) has maintained its FY 2022–23 real GDP forecast of 7.2 per cent. According to Das, capacity utilisation increased to 74.5 per cent in Q4 from 72.4 per cent in Q3. He went on to say that it is likely to rise even more. He also stated that an increase in non-oil and non-gold imports indicates that the economy is recovering. A good monsoon is expected to boost rural consumption. Consumer confidence is expected to grow in the coming year, according to the RBI study.
The bank rate and the marginal standing facility rate have both been raised to 5.15 per cent from 4.65 per cent. The MPC hiked the repo rate by 40 basis points to 4.40 per cent in its off-cycle monetary policy review last month to contain inflation while maintaining an “accommodative” stance.
The Reserve Bank of India is required to keep inflation between 2% and 6%. The Reserve Bank of India’s retail inflation hit an eight-year high of 7.79 per cent in April, prompting the Reserve Bank of India to raise interest rates in an off-cycle monetary policy last month.
In its April 2022 bi-monthly monetary policy review, the central bank raised its retail inflation forecast for the current fiscal year 2022–23 from 4.5 per cent to 5.7 per cent, up from 4.5 per cent previously. Furthermore, the RBI reduced its GDP growth forecast for FY23 to 7.2 per cent, down from 7.8 per cent previously.
Due to growing inflation, supply chain disruptions, and geopolitical concerns, the World Bank decreased India’s economic growth prediction for the financial year 2022–23 to 7.5 per cent on Tuesday.
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