India’s central bank hiked lending rate by 25 basis points – or 0.25 percent – on Wednesday, in line with the market expectation.
The Monetary Policy Committee (MPC) of the Reserve Bank of India announced increasing the repo rate – the key rate at which the RBI lends short-term funds to commercial banks – to 6.50 per cent from 6.25 per cent amid signs of inflation moderation.
This is the sixth time in a row RBI hiking the interest rate, taking the total increase to 2.5 percent since May 2022.
The RBI panel also decided to remain focused on withdrawal of accommodative stance.
“The MPC was of the view that further calibrated monetary policy action is warranted to keep inflation expectations anchored, break the persistence of core inflation and thereby strengthen the medium-term growth prospects,” RBI Governor Shaktikanta Das said.
In its December monetary policy review, the central bank had raised the benchmark interest rate by 35 bps.
Inflation Projection
RBI said domestic inflation expected to be 5.3 per cent for 2023-2024.
According to the central bank’s projections, inflation is expected to be 5 per cent in Q1, 5.4 percent in Q2 and Q3 and at 5.6 percent in Q4.
The central bank had earlier indicated inflation to ease to 5 per cent by April to June of next year.
Growth Projection
RBI has pegged India’s real GDP growth for FY24 at 6.4 per cent, while growth for FY23 has been pegged at 7 per cent.
The MPC has forecast Q1FY24 growth at 7.8 per cent, Q2 at 6.2 per cent, Q3 at 6 per cent and Q4 at 5.8 per cent.
The MPC in its December 2022 meeting had forecast real GDP growth for 2022-23 at 6.8 per cent, with Q3 at 4.4 per cent and Q4 at 4.2 per cent.
Follow us on
