Economic Buzz: Indias Central Bank Hikes Key Rate By 50Bps

5 Aug 2022 , 10:53 AM

Indias central bank, the Reserve Bank of India, in its Monetary Policy Committee (MPC) meeting decided to increase the policy repo rate under the liquidity adjustment facility (LAF) by 50 basis points to 5.40 per cent with immediate effect. Consequently, the standing deposit facility (SDF) rate stands adjusted to 5.15 per cent and the marginal standing facility (MSF) rate and the Bank Rate to 5.65 per cent. The MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth. On the basis of an assessment of the current and evolving macroeconomic situation, these decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth. The MPC noted that inflation is projected to remain above the upper tolerance level of 6 per cent through the first three quarters of 2022-23, entailing the risk of destabilizing inflation expectations and triggering second round effects. Powered by Commodity Insights