The Monetary Policy Committee of the Central Reserve Bank has increased the policy interest rate by 50 basis points after the bi-monthly monetary policy review on August 5, 2022. After this the repo rate has increased from 4.9% to 5.4%. Reserve Bank Governor Shaktikanta Das said in his announcement that we are going through the problem of high inflation and financial markets have also been volatile. Keeping in view the global and domestic scenarios, the Monetary Policy Committee has decided to increase the benchmark rate.
After today’s increase, the repo rate has reached the pre-corona epidemic level. This is the third consecutive hike. Prior to this, the RBI had increased the aggregate by 0.90 per cent in May and June. That is, the repo rate has increased by 1.4% in the last four months.
It was being said that to control the high inflation rate, RBI can increase the repo rate by 25 to 50 basis points.
The Governor also said that the Monetary Policy Committee has decided to focus on withdrawing the soft policy stance to contain inflation. He also said that the International Monetary Fund has lowered the economic growth forecast and expressed the risk of recession.
GDP Growth and Inflation Projections
Shaktikanta Das said that the Reserve Bank of India has kept the economic growth rate forecast for the current financial year at 7.2 percent. The central bank has retained the forecast of retail inflation at 6.7 percent in the current financial year. He said the inflation forecast for the fiscal year 2022-23 is retained at 6.7 per cent, based on a normal monsoon and the possibility of crude oil prices at $105 per barrel.
He said the consumer price index inflation is at an unsatisfactory level. The committee estimates that inflation will remain above 6 per cent.
What did the RBI governor say on the rupee?
Regarding the Indian rupee which has touched a record low level, the governor said that the rupee is trading systematically. Till August 4, it has broken 4.7 percent. The Reserve Bank is keeping an eye on the volatility of the rupee. Das said that the major reason for the fall in the rupee is the strengthening of the dollar, and not because of any weakness in the domestic economy. However, due to the policies of the RBI, the rupee is in a much better position against the dollar against many other currencies, he said.
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