RBI Governor Shaktikanta Das. file | Photo Credit: PTI
Monetary Policy Committee (MPC) of reserve Bank of India (RBI) based on an assessment of the macroeconomic situation and its outlook, decided by a majority of 4 out of 6 members to increase the policy repo rate by 25 basis points to 6.50% with immediate effect.
Consequently, the Standing Deposit Facility (SDF) rate stands revised to 6.25%; and the Marginal Standing Facility (MSF) rate and the Bank Rate at 6.75%.
The MPC also decided, by a majority of 4 out of 6 members, to focus on a return to accommodation to ensure that inflation remains within the target going forward, while supporting growth.
In its monetary policy statement, RBI governor Shaktikanta Das said on February 8, the MPC’s view was to “further calibrate monetary policy to stabilize inflation expectations, break the persistence of core inflation and thereby strengthen medium-term growth”. Monetary policy action is needed.” possibilities. Accordingly, the MPC decided to increase the policy repo rate by 25 basis points to 6.50%.
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“The MPC will continue to maintain a close watch on the rising inflation outlook to ensure that it remains within the tolerance band,” he added.
Taking various factors into account, the real GDP growth rate for 2023-24 is estimated at 6.4% with 7.8% in the first quarter; Q2 at 6.2%; Q3 at 6.0%; and Q4 at 5.8%. “The risks are evenly balanced,” Mr Das said.
Taking into account several factors and assuming an average crude oil price (Indian basket) of US$ 95 per barrel, Mr Das said inflation is projected to be 6.5% in 2022-23, with Q4 at 5.7%.
On the assumption of a normal monsoon, CPI inflation for 2023-24 is estimated at 5.3%, with Q1 at 5.0%, Q2 at 5.4%, Q3 at 5.4% and Q4 at 5.6%. “The risks are evenly balanced,” he said.
Stating that an increase of 25 basis points was considered appropriate at the present time, he said, “The reduction in the size of the rate hike provides an opportunity to evaluate the inflation outlook and the effects of the actions taken so far on the economy.” Large scale. “It also provides elbow room to weigh all the incoming data and predictions to determine appropriate action and policy stance,” he added.
“Monetary policy will remain accommodative and watchful for moving parts of the inflation trajectory to effectively address challenges to the economy,” Mr Das said.