 "Shaktikanta Das")
The Reserve Bank of India announced renewed rate hikes in the August 2022 Monetary Policy committee review. The repo rate was hiked by 50 bps to 5.40 per cent. The RBI Governor Shaktikanta Das stated that inflation is a primary concern, and stressed that in the near term will be observing a 4 per cent inflation.
Shantikanta stressed that the rupee's performance was much better than other emerging market economy currencies. Post the announcement, yields on 10-year-old government bonds also increased. Professor Jayanth Verma, the MOC member, disagreed with the committee’s policy.
Also read | RBI Hikes Repo Rate By 50 bps To 5.40%
Also read | RBI Hikes Repo Rate By 50 bps To 5.40%
Shaktikanta Das has expressed that liquidity has substantially increased from the market. The loan-demand growth and the current policy rate hike are raising deposit rates. Thus, more banks are raising more funds for lending. The governor announced that the FY23 GDP growth forecast has been retained at 7.2 per cent.
Over the past three months, inflation has eased since the central bank hiked repo rates by 90 basis points in May and June 2022 combained, to counter rising prices.
RBI Monetary Policy 2022: Key points
- Repo rate or key short-term lending rate increased by 50 basis points (bps) to 5.4 per cent for the third consecutive time in 2022.
- 140 bps hike in repo rate since May 2022 to control inflation.
- Real GDP growth forecast: Q1 at 16.2 per cent; Q2 at 6.2 per cent ; Q3 at 4.1 per cent and Q4 at 4 per cent.
- GDP growth forecast for 2022-23 retained at 7.2 per cent.
- Real GDP growth for Q1: 2023-24 projected at 6.7 per cent.
- Retail inflation forecast too retained at 6.7-per cent for 2022-23.
- Inflation forecast for: Q2 at 7.1 per cent; Q3 at 6.4 per cent, Q4 at 5.8 per cent ; Q1:2023-24 at 5 per cent.
- Domestic economic activity to expand
- MPC decided to stay focused on withdrawal of accommodative stance to observe inflation
- RBI will try maintaining the stability of the rupee
- Currently, the rupee is devalued by 4.7 per cent against the US dollar in fiscal year 2022 till August 4.
- Devaluation and depreciation of rupee depends more on the US dollar's growth than the inability of the Indian economy.
- India witnessed large portfolio outflow of USD 13.3 billion in FY23 up to August 3.
- Foreign exchange reserves of India stays as the fourth largest internationally
- A mechanism to be implemented to allow NRIs to utilise Bharat Bill Payment system for payments of education and utility on behalf of their families in the country.
- The forthcoming meeting of the rate-setting panel is scheduled for September 28-30, 2022.
RBI Repo Rate Changes
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