Business
oi-Prakash KL
The Reserve Bank of India’s Monetary Policy Committee on Wednesday raised the policy repo rate by 25 basis points to 5.5 per cent, Governor Sanjay Malhotra said, citing a worsening inflation outlook and fresh global risks.
The MPC voted unanimously to increase the policy repo rate under the liquidity adjustment facility. It also changed its stance to “calibrated tightening” by a majority of 4-2. Following the hike, the standing deposit facility rate stands at 5.25 per cent, while the marginal standing facility rate and bank rate have moved to 5.75 per cent.
The Reserve Bank of India (RBI) raised the policy repo rate by 25 basis points to 5.5% in its latest monetary policy decision, updating the benchmark interest rate affecting loans and liquidity.
Malhotra said the panel took the decision after assessing evolving macroeconomic and financial conditions. “The MPC noted that the global context on account of geopolitical developments remains challenging. Nonetheless, the Indian economy has been strong and the economic momentum remains broad-based,” he said.
The economy is expected to remain resilient, but inflation and its outlook are not as benign as they were last year, he added. The RBI expects headline CPI inflation to average almost 5.8 per cent over the next three quarters, including the current one. Core inflation is projected at 4.4 per cent for this financial year.
The Governor said, “The sudden re-escalation of the West Asia conflict in September and the consequent hardening, as well as volatility in global crude prices, soured global economic sentiments and heightened financial market volatility. Although global growth remains resilient, it is projected to decelerate this year with respect to the previous year.
Driven by escalating energy costs and rising food prices, global inflation is projected to increase sharply, prompting monetary policy tightening by major central banks across the world. Lingering trade uncertainty, rising bond yields in advanced economies, and an appreciating dollar are keeping global financial market sentiments nervous and fragile. Further tightening of global financial conditions, uncertainty about fair valuation of AI stocks, and an elusive resolution of the West Asia conflict pose significant downside risks.”
The MPC met on the 5th, 6th and 7th of this month to deliberate and decide on the policy repo rate.
