The central bank’s monetary policy committee (MPC) on Wednesday voted unanimously to increase repo rate by 40 basis points (bps) in an off-cycle meeting to tame inflation, which has remained elevated for some time now.
The repo rate, after the surprise move, now stands at 4.40 per cent, with immediate effect. Consequently, the standing deposit facility (SDF) rate stands adjusted to 4.15 per cent; and the marginal standing facility (MSF) rate and the Bank Rate to 4.65 per cent.
Most economists expect the RBI’s monetary policy committee (MPC) to change its stance to ‘neutral’ in June and follow up with an increase in the key policy rate, which could be the first in a series of hikes this year.
RBI Governor Shaktikanta Das said the decision to increase the repo rate was taken keeping in mind the rising inflation, geopolitical tensions, high crude oil prices, and shortage of commodities globally, which have impacted the Indian economy.
“The decision today to raise repo rate may be seen as a reversal of rate action of May 2020. Last month, we had set out a stance of withdrawal of accommodation. Today’s action needs to be seen in line with that action,” Das said, according to NDTV.
“I would like to emphasise that the monetary policy action is aimed at containing inflation spike and re-anchoring inflation expectation,” he said, adding that “high inflation is known as detrimental to growth”.
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