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As expected, RBI MPC hikes repo rate by 35 basis points

7 Dec 2022 , 10:26 AM

Amid easing inflation, the Reserve Bank of India (RBI)’s rate-setting panel announced hike of 35 basis points in repo rate to 6.25%. Repo is the rate at which RBI lends short-term funds to banks. One basis point is one-hundredth of a percentage point.

This moves follows aggressive increase in the benchmark lending rate since May 2022 (50 basis points thrice since June and 40 basis points in May).

Policy date Hike in repo rate
September 2022 50 basis points
August 2022 50 basis points
June 2022 50 basis points
May 40 basis points

After considering the hike announced today, the repo rate has surged 225 basis points since May 2022.

CPI inflation seems to be cooling off, though it is still more than RBI’s upper tolerance level of 6%. CPI inflation stood at 6.77% in October from 7.41% in September, amid softening prices of food items. 

GDP growth, on the other hand, slowed to 6.3% in the September 2022 quarter versus 13.5% in the June 2022 quarter. RBI is forecasting GDP growth of 6.8% for FY23, down from 7% projected earlier.

Other highlights of the policy include:
* Continued focus on withdrawal of accommodation
* Inflation expected to be above 4% in the next 12 months
* CPI inflation for FY23 projection unchanged at 6.7% 

Related Tags

  • interest rate
  • monetary policy
  • MPC
  • RBI
  • RBI policy
  • Repo Rate
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