RBI Governor Shaktikanta Das on Wednesday announced the unanimous decision of the Monetary Policy Committee (MPC) to raise the repo rate – the key interest rate at which the central bank lends money to banks – by 50 basis points to 4.9%.
The RBI MPC also decided to remain focused on withdrawing its “dovish” stance to ensure inflation remains within target levels while supporting growth.
The RBI’s latest action comes at a time when central banks face the Herculean task of reining in inflation without slowing economic growth. The announcements are in line with the expectations of economists and bankers. A majority of economists in a CNBC-TV18 poll had pegged the June 8 rate hike at 50-100 basis points.
“The repo rate is still below pre-pandemic levels…The MPC noted that in such a challenging global environment, domestic economic activity is gaining traction…We will remain focused on reducing inflation closer to target and on macroeconomic stability,” Governor Shaktikanta Das said.
Read also :
Economists welcomed the central bank’s announcements and stance.
“I am very happy that the RBI removed the word ‘accommodative’. I was actually looking for a calibrated tightening, but maybe they will wait until the repo rate reaches pre-pandemic level,” Kaushik Das said. , chief economist at Deutsche Bank.
“It’s almost like saying, ‘We’re more neutral than before.’ That’s one thing I would take away from the position. And second, the action is clear that they will want to remove the pandemic-related housing that was there,” said Indranil Pan, chief economist at Yes Bank.
On May 4, Das had announced the MPC’s decision to raise the repo rate from a record low to 4.4% and raise the cash reserve ratio (CRR) – the amount of cash commercial banks must keep. with the RBI – from 50 basis points to 4.5%.
Official data released last month showed India’s official GDP growth hit a four-quarter low of 4.1% on an annual basis during the January-March period. Economic growth for the full year ended March 2022 came in at 8.7% due to a weak base from the previous year, although lower than the Bureau of Economics estimate of 8.9%. statistics.
First post: STI