As anticipated by most, Reserve Bank of India (RBI) on 8th June 2022 has hiked the repo rate by 50 basis points taking it to 4.9%.
India’s Central Bank also announced hike in Marginal Standing Facility (MSF) Rate & Bank Rate from earlier 4.65% to 5.15%.
RBI’s monetary policy committee (MPC) cited higher inflation and higher supply shocks as key reasons behind the repo rate hike. Reserve Bank governor stated that inflation will remain over 6% in the 1st 3 quarters of FY22-23. RBI now estimates India’s inflation during FY22-23 to be at 6.7% from its earlier prediction of 5.7%.
However, the central bank is optimistic on India’s GDP growth and pegs it to be at 7.2%.
Earlier on 5th May 2022 RBI raised the repo rates by 40 basis points. This is the 2nd time the central bank has revised repo rates nearly within a month.