The Reserve Bank of India on Wednesday raised the repo rate by 50 basis points to 4.9 per cent to tame the rising inflation, which has been now above RBI’s 6 per cent tolerance level for four months in a row.
Further, wholesale inflation in the country has been in double digits for over a year now.
RBI Governor Shaktikanta Das on Wednesday, in his remarks while spelling out the outcome of the ongoing monetary policy review meeting that started on Monday, said, India’s retail inflation is likely to stay above the tolerance level of 6 per cent till third quarter of FY23 before moderating below 6 per cent.
For FY23, the RBI sees overall inflation at 6.7 per cent, with 7.5 per cent in Q1, 7.4 per cent in Q2, 6.2 per cent in Q3, and 5.8 per cent in Q4, taking into consideration the normal monsoon and average crude oil basket price of $105 per barrel.
Expert Comments :
“The 50bps repo rate hike comes on the back of persistence of elevated inflation and the continued upside risks. Given that inflation is expected to remain above 6% through 3QFY23 , RBI has to frontload actions. We continue to see another 60-85bps hike in rest of FY23 to manage inflationary expectations.”-Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank.
“In line with market expectations the MPC decided to increase repo rate by 50bps and also sharply increased inflation expectation to 6.7%. Further they continued to emphasize on withdrawal of accommodation on the liquidity side and retained the growth target @7.2% . Given the geo political tension, high commodity prices including oil we expect MPC to continue to hike rates in the subsequent policies in this fiscal to manage inflationary expectations”-Shanti Ekambaram, Group President – Consumer Banking, Kotak Mahindra Bank Ltd.