The Monetary Policy Committee (MPC) of the Reserve Bank of India(RBI) has decided to increase the policy repo rate by 50 basis points on 30th September, RBI Governor Shaktikant Das announced. Since May, the central bank has increased the repo rate four times, bringing it most recently to 5.90%.
The MPC in its report has also dropped the growth projection from 7.2% to 7% for the financial year 2023. While the inflation projection for the financial year has been kept at 6.7%.
To urgently control the inflation pressure faced by the citizens due to rising food prices following supply disruptions caused by the Russia-Ukraine war leading to trade imbalance, RBI continued to opt to withdraw its accommodative stance. In addition, the uneven distribution of rains may have an additional impact on the prices of staple foods.
The governor said “This action will support medium-term growth prospects. Accordingly, the MPC decided to increase the policy repo rate by 50 basis points to 5.9% and to remain focused on the withdrawal of accommodation, while supporting growth”.
“The world has witnessed two major shocks– the COVID-19 pandemic and the Ukraine conflict. Now, we are in the midst of a third major shock arising from monetary tightening and aggressive communications from advanced countries’ central banks”, he further underlined at the Post Monetary Policy Press Conference.
The Repo rate is the primary rate at which the RBI lends commercial banks short-term funds.
