The Reserve Bank of India (RBI) on Friday hiked the repo rate by 50 basis points (bps) to 5.90 %. It is the fourth straight increase in the current cycle.
The decision was taken by a six member Monetary Policy Committee (MPC) headed by RBI governor Shaktikanta Das. In March , 2020, RBI had slashed the repo rate to cushion the lockdown impact and it was maintained for about two years, till May , 2022.
The RBI Governor said, “The world is in the midst of third major shock from aggressive monetary tightening by central banks. There is nervousness in financial market, global economy eye of new storm. Indian economy continues to be resilient in midst of global turmoil. In the scenario, RBI is hiking benchmark lending rate by 50 basis points to 5.90 per cent. We will remain focused on withdrawal of accommodative monetary policy.”
He said that inflation is expected to remain elevated at around 6% in second half of 2023.
“Economic activity in India remains stable. Recent correction in global crude oil prices if sustained may provide relief to inflation. High frequency data for Q2 indicates that economic activities remain resilient, and private consumption is picking up. RBI cuts its economic growth projection for FY23 to 7 pc from earlier estimate of 7.2 pc,” said Das.
He added that merchandise exports have been affected due to external factors.