After the bimonthly monetary policy review on August 5, 2022, the Central Reserve Bank’s Monetary Policy Committee raised the policy interest rate by 50 basis points. Following that, the repo rate rose from 4.9 percent to 5.4 percent. In his announcement, Reserve Bank Governor Shaktikanta Das stated that excessive inflation is a problem, and the financial markets have also been unstable. The Monetary Policy Committee has chosen to raise the benchmark rate while taking both the domestic and international developments into consideration.
The repo rate has now increased to a level similar to that of the pre-corona outbreak. The current raise is the third in a row. Before that, in May and June, the RBI had raised the aggregate by 0.90 percent. In other words, over the last four months, the repo rate has grown by 1.4 percent.
It was claimed that the RBI could raise the repo rate by 25 to 50 basis points in order to lower the high inflation rate.
The Monetary Policy Committee has chosen to concentrate on ending the easy policy stance in order to keep inflation under control, the Governor added. He added that the IMF had revised its projection for economic growth and warned of the possibility of a recession.
According to Shaktikanta Das, the Reserve Bank of India has maintained its 7.2 percent economic growth prediction for the current fiscal year. Retail inflation is still expected to be 6.7 percent in the current fiscal year, according to the central bank. He said that, given a typical monsoon and the potential for crude oil prices to reach $105 per barrel, the inflation prediction for the fiscal year 2022–23 is maintained at 6.7 percent.
He claimed that the amount of consumer price index inflation is not acceptable. According to the committee, inflation will continue to be higher than 6%.
What did the RBI governor say on the rupee?
The governor stated that the Indian rupee is trading methodically in reference to its record-breaking low. It has broken 4.7 percent as of August 4. The rupee’s volatility is being monitored by the Reserve Bank. According to Das, the dollar’s rise rather than any domestic economic weakness is the main cause of the rupee’s decline. He added that the rupee is substantially stronger versus the dollar than many other currencies as a result of RBI measures.
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