RBI Governor Shaktikanta Das says the RBI’s MPC met in an off-cycle meeting and decided to hike policy rates to help curb rising inflation.
RBI Governor Shaktikanta Das says the RBI’s MPC met in an off-cycle meeting and decided to hike policy rates to help curb rising inflation.
reserve Bank of India In a sudden move, the RBI on Wednesday raised the policy repo rate by 40 basis points (bps) to 4.4% and the cash reserve ratio (CRR) by 50 basis points to 4.5%.
Making an unscheduled announcement, RBI Governor Shaktikanta Das said the RBI’s Monetary Policy Committee (MPC) met in an off-cycle meeting and decided to hike policy rates. Rising inflation,
He said that despite the rate hike, the Reserve Bank of India will maintain its ‘accommodative’ stance even if the fundamentals of the Indian economy remain strong.
‘with immediate effect’
RBI said that the hike in repo rate will be applicable with immediate effect.
Consequently, the Permanent Deposit Facility (SDF) rate stands adjusted to 4.15% and the Marginal Standing Facility (MSF) rate and the Bank Rate to 4.65%.
“The MPC also decided to remain accommodative with a focus on the return of housing to ensure that inflation remains within the target, while supporting growth going forward,” RBI said in a statement.
“These decisions are in line with the objective of achieving the medium-term target for Consumer Price Index (CPI) inflation of 4% within a band of +/- 2%,” it noted.
interruption, lack
RBI said that since the MPC meeting in April 2022, disruptions induced by geopolitical tensions and sanctions, shortages and rising prices have persisted and increased risks.
“Growing uncertainty surrounds the inflation trajectory, which is heavily dependent on the evolving geopolitical situation. Global commodity price dynamics are driving the path of food inflation in India, including prices of inflation-sensitive commodities, impacted by global shortages due to production losses and export restrictions by major producing countries,” the central bank pointed out.
RBI said the MPC was of the view that while economic activity was navigating the vortex of forces facing the world with resilience on underlying fundamentals and buffer strength, the risks to the near-term inflation outlook were rising sharply. , as reflected. Inflation print for March and subsequent developments.
“In this environment, the MPC expects inflation to rule higher, requiring firm and calibrated steps to reduce inflation expectations and have a second round of effects.”
However, the RBI governor sought to allay fears of the impact of higher interest rates on growth, saying: “Our monetary policy action today – aimed at easing inflation and lowering inflation expectations – will help the economy in the medium term. will strengthen and consolidate its growth prospects.” He added that sustained high inflation ‘essentially harms savings, investment, competition and production growth’.
He stressed that the RBI was mindful of the potential near-term impact of higher interest rates on output, and assured that its outlook would focus on ‘careful and calibrated withdrawals of pandemic-related exceptional housing, keeping inflation in mind’. Will have to do development dynamics. He said the RBI would ensure “adequate liquidity in the system to meet the productive requirements of the economy to support credit offtake and growth”.