Reserve Bank of India repo rate: RBI Governor Shaktikanta Das-headed Monetary Policy Committee (MPC) has raised the repo rate by 25 basis points to 6.5 per cent on Wednesday from 6.25 per cent. Repo Rate (RR) is the rate at which the central bank lends money to commercial banks or financial institutions, public or private, in India against government securities. Das said that four MPC members voted in favour of the repo rate revision versus two members. The central bank said that its policy stance remains focused on the withdrawal of accommodation.
“Repo rate now in positive territory. Further action is warranted in India,” said RBI Governor Shaktikanta Das said on Wednesday.
The current policy rates:
> Standing Deposit Facility (SDF) rate: 6.25%
> Marginal Standing Facility (MCF) rate: 6.75%
In the RBI’s December monetary policy review, the central bank raised the key benchmark interest rate by 35 basis points. This is the sixth time the interest rate since May 2022. The central bank has hiked the short-term lending rate by 250 basis points to contain rising inflation. The policy rates before the February revision stood at:
Repo Rate: 6.25%
Standing Deposit Facility Rate: 6.00%
MSF Rate: 6.50%
Bank Rate: 6.50%
Reverse Repo Rate: 3.35%
CRR: 4.50%
SLR: 18.00%
“Policy rate at 6.5 per cent still trails the pre-pandemic level,” Das said, adding that core inflation will remain sticky. Core inflation generally refers to inflation in manufactured goods.
As per experts, the latest revision of repo rates could be the final increase in RBI’s current tightening cycle, following which there can be a pause.
Das noted that the global economic outlook is not as grim as it was a few months ago, Das said. Inflation still remains well above the target in major economies. The situation remains fluid and uncertain.
He added that the Indian economy remains resilient and that the real GDP growth is estimated at 7 per cent in 2022-23.
Das said that several central banks have lowered the pace of rate hikes or paused rate hikes. However, core inflation remains sticky. He said that inflation in India will rule above 4 per cent target. Also, further monetary policy action is warranted in India. Das added that the retail inflation will average 6.5 per cent in the current fiscal and moderate to 5.3 per cent in 2023-24.
On Tuesday, US Federal Reserve Chairman Jerome Powell too said that inflation is beginning to ease, though he added that it will be a long process and cautioned that interest rates could rise more than markets anticipate if the economic data doesn’t cooperate. “The disinflationary process, the process of getting inflation down, has begun and it’s begun in the goods sector, which is about a quarter of our economy,” Powell said.