RBI MPC Meet: Repo Rate Hikes by 50 bps, Inflation Above 6%
The Reserve Bank of India has announced the Monetary Policy Review. Read further to know about the review shared by the bank.
On Wednesday, June 08, the Reserve Bank of India (RBI) has chaired it's Monetary Policy Committee (MPC) meet. It has decided to raise the Repo Rate by 50 basis points to 4.9 percent. For the current fiscal year, the inflation is expected at 6.7 percent. As per the RBI Governor, Q1 inflation is expected to be at 7.5 percent and for Q2 it is expected to be at 7.4 percent. However, in Q3 it is expected to be at 6.2 percent and in Q4 it will fall to 5.8 percent.
It is the second time in the last one month that RBI has hiked the repo rate, as a result the EMI of loans (home loan, car loan, personal loan) will increase.
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The Monetary Policy Review
As the RBI has announced the monetary policy review, the stock market on Wednesday fell down and reached below 55,000 at 10:30 am which was opened with a green mark. The RBI Governor, Shaktikanta Das said, "Upside risk to inflation persists; a recent spike in tomato, crude prices fueling inflation. Inflation likely to remain above 6 percent in first three quarters of current fiscal. Our steps will be calibrated, focussed on bringing down inflation to target level."
Inflation to Rise
About the inflation, the RBI's forecast assumes normal monsoon and crude basket price at $105/barrel. Keeping in mind the requirements of the economy, the monetary policy accommodation will be withdrawn. For the Indian crude oil basket, the baseline inflation forecast assumes a price of $105/barrel.
The RBI Governor said, "The faster pace of monetary policy normalization undertaken by systematic advanced economies (AEs) is leading to heightened volatility in global financial markets."
With the assumption of a normal monsoon, in 2022 and average crude oil price in the Indian basket of 105 dollars per barrel, inflation is now projected at 6.7% in 2022-23: RBI Governor Shaktikanta Das pic.twitter.com/N65tBEpdBY
— ANI (@ANI) June 8, 2022
Deloitte's Economist, Rumki Majumdar said, "the forward guidance and communication about the monetary policy stance-despite raising the policy rates, the monetary policy stance has remained accommodative. Given the capital outflows that India has witnessed lately, managing liquidity conditions will be critical for healthy credit growth and business and consumer confidence."
