The RBI’s monetary policy committee today voted to raise the repo rate, which is the primary lending rate to banks, by 5.4 percent with immediate effect. The central bank also kept its forecast for this fiscal year’s GDP growth.
The Reserve Bank of India started a tightening cycle during an unexpected policy meeting and has subsequently increased the current repo rate by 140 basis points to combat inflationary pressures. Prior to the epidemic, the current repo rate of RBI was 5.15 percent.
Following the RBI increase repo rate 2022, the rates for the Standing Deposit Facility and the Marginal Standing Facility were correspondingly increased by the same percentage, to 5.15 percent and 5.65 percent, respectively.
The central bank is set to increase the benchmark interest rate by a fixed amount, ranging from 25 to 50 basis points. After the announcement of the RBI repo rate hike, bond yields in India increased. The standard 10-year bond yield increased to 7.23%.
Although it has decreased from an eight-year high of 7.8 percent, retail inflation in India has been above 7 percent for the past three months. The governor’s most recent remarks support the claim that there is little chance that India will enter a recession.
This action was necessary to reduce the current soaring inflation, together with the shift from neutral to the withdrawal of accommodation.
Concerning the geopolitical and global challenges that could have a significant impact on supply chains, the opinion was circumspect.
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