RBI hikes rates by 40 basis points with immediate effect: Governor Shaktikanta Das

RBI hikes rates by 40 basis points with immediate effect: Governor Shaktikanta Das

The bank’s next scheduled rate decision isn’t until June 8.

In an unexpected move, RBI Governor Shaktikanta Das announced on Wednesday that the Monetary Policy Committee (MPC) unanimously voted to raise the policy repo rate by 40 basis points (bps) to 4.40 percent with immediate effect, citing persistent inflationary pressures in the economy.

The RBI has raised borrowing rates for the first time since August 2018.

The MPC has also opted to remain accommodative while focusing on withdrawal, implying a reversal of the rate action in 2020, which saw 75 basis points slashed after the world economy was thrown into disarray following the COVID-19 epidemic.

Explaining the decision, he said, "MPC decided to hold an off-cycle meeting to reassess the inflation-growth dynamics. There is a collateral risk of inflated inflation for a long time. "

Persistent inflation pressures are becoming more acute, Governor Shaktikanta Das said in an online briefing, adding that there is a risk that prices stay at this level for "too long" and expectations become unanchored.

The bank’s next scheduled rate decision isn’t until June 8.

As inflation rose, the RBI became more hawkish in its April policy, shifting its focus from growth to inflation.

In March, headline inflation was 6.95 per cent, exceeding the Reserve Bank of India's 6 per cent comfort level for the third month in a row.

Price pressures are expected to rise even more in the coming months, according to economists.

RBI hikes rates by 40 basis points with immediate effect: Governor Shaktikanta Das
RBI Recruitment 2022: Applications for 294 posts of Grade B Officer to end soon, check details

The highlights of the Governor of the Reserve Bank of India's speech are listed below:

From May 21, the Cash Reserve Ratio will be increased by 50 basis points to 4.5 per cent.

Inflation must be controlled in order for the Indian economy to remain stable, according to RBI Governor Shaktikanta Das. He went on to say that measures to keep prices stable will aid financial and macroeconomic stability.

The threat of input cost pressure is fueling a new round of pricing hikes. He emphasised that price increases will have an impact on inflation.

Nine out of the 12 food subgroups registered an increase in inflation in the month of March. High-frequency price indicators for April indicate the persistence of food price pressures.

Related Stories

No stories found.