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The Reserve Bank of India (RBI) announced that it will increase the policy repo rate by 50 basis points to 4.9 per cent on Wednesday. This is the second hike in five weeks aimed at quelling the inflation.
The RBI’s Monetary Policy Committee (MPC) vote was unanimous, and has decided to keep stance withdrawal from accommodative, RBI Governor Shaktikanta Das said in a press conference today, according to ANI.
The decision was taken during a three-day meeting to review the interest rates in the country.
“The MPC voted unanimously to increase the policy repo rate by 50 bps to 4.90 per cent,” Das added. “Consequently, the standing deposit facility, the SDF rate, stands adjusted to 4.65 per cent and the marginal standing facility, MSF rate and bank rate, to 5.15 per cent,” he said.
Last month, in its off-cycle monetary policy review, the Central Bank hiked the policy repo rate by 40 basis points or 0.40 per cent to 4.4 per cent. This was the first increase in the policy repo rate in nearly two years.
Inflation has been above the RBI’s 2 to 6 per cent target band since the beginning of this year.
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As per the latest available data, India’s Consumer Price Index (CPI) based inflation surged to an eight-year high of 7.79 per cent in April. It has been above 6 per cent since January 2022.
Consumer Price Index (CPI) inflation in April 2022 was the highest since May 2014, when it stood at 8.33 per cent.
Bank of America Securities said in a research note that the retail inflation is anticipated to be around 7.1 per cent in May, and CPI-based inflation to be around 6.8 per cent during the current financial year.
In April, the RBI increased the inflation forecast for the current financial year from its earlier projection of 4.5 per cent to 5.7 per cent. According to Bank of America Securities, the RBI is likely to further increase this projection to 6.5 per cent, either next week or in August.
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