RBI increases the repo rate by 25 basis points to 6.5 per cent

Mumbai (Maharashtra) : The Monetary Policy Committee (MPC) of the Reserve Bank of India decided to raise the key benchmark interest rate by 25 basis points to 6.5 per cent on Wednesday. Four out of six members of MPC have decided to go ahead with this hike in the repo rate, RBI Governor Shaktikanta Das said on Wednesday.

Shaktikanta Das-headed Monetary Policy Committee (MPC) started its three-day meeting on February 6 amid the rate hiking spree that started in May last year to check inflation.

The global economic outlook doesn’t look as grim now as it did a few months ago, growth prospects in major economies have improved while inflation is on a descent though inflation still remains well-above the target in major economies: RBI Governor pic.twitter.com/wtlObIAwGe

— ANI (@ANI) February 8, 2023

With retail inflation showing signs of moderation and remaining below the Reserve Bank of India’s 6 per cent upper tolerance level, and projected slowdown in gross domestic product (GDP) growth in the next fiscal starting April, experts are of the opinion that the central bank may only opt for a 25 basis points hike in the key interest rate.

Unprecedented events of the last three years have put to test monetary policy across the world. Emerging market economies are facing sharp tradeoffs between supporting economic activity and controlling inflation while preserving policy credibility: RBI Governor Shaktikanta Das pic.twitter.com/1oHOMJXF2W

— ANI (@ANI) February 8, 2023

In its December monetary policy review, the central bank raised the key benchmark interest rate (repo) by 35 basis points (bps) after delivering three back-to-back increases of 50 bps.

Since May last year, the RBI has increased the short-term lending rate by 225 basis points to contain inflation, mostly driven by external factors, especially global supply chain disruption following the Russia-Ukraine war outbreak.