The RBI’s Monetary Policy Committee on Wednesday unanimously decided to raise the repo rate by 50 basis points to 4.90 per cent with the focus on withdrawal of accommodation. Addressing the media, RBI Governor Shaktikanta Das said food and commodity prices remain elevated, the Russia-Ukraine war has led to the globalisation of inflation and central banks cross the world are reorienting policies.
He said the Indian economy remains resilient but the inflation is much above the RBI’s upper tolerant level and it will remain above six per cent for the first three quarters of the current financial year.
In its off-cycle monetary policy review last month, the MPC had increased the repo rate by 40 basis points to 4.40 per cent to control inflation, with an ‘accommodative’ stance. In the April policy review, it had maintained the status quo on the key policy rate to keep it at four per cent having an ‘accommodative’ stance with focus on withdrawal of accommodation.
The RBI is mandated to keep inflation within the range of 2-6 per cent. The retail inflation in April stood at an eight-year high of 7.79 per cent, forcing the RBI to hike interest rates in the off-cycle monetary policy last month.
In the April 2022 bi-monthly monetary policy review, the central bank had revised upwards its retail inflation forecast to 5.7 per cent for the current financial year 2022-23, as compared with the 4.5 per cent projected earlier. The RBI had also revised downwards its GDP growth projection for FY23 to 7.2 per cent, compared with the 7.8 per cent forecast earlier.
The World Bank on Tuesday cut India’s economic growth forecast for the financial year 2022-23 to 7.5 per cent, due to rising inflation, supply chain disruptions and geopolitical tensions.
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