THE RESERVE Bank of India on Thursday announced another hike in key lending rates. RBI Governor Shaktikanta Das said that the repo rate has been hiked by 25 basis points to 6.5 per cent, citing sticky core inflation. This is the sixth straight hike in lending rates since May last year, taking the total quantum of the hike to 250 basis points.
"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," Shaktikanta Das said.
Shaktikanta Das-headed MPC started its three-day meeting on February 6 amid the rate hiking spree that started in May last year to check inflation. The MPC comprises three members of the federal bank and three external members. Four of the six members of the MPC voted in favour of the decision.
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. In December, RBI raised the repo rate by 35 basis points after delivering three back-to-back increases of 50 bps.
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- RBI projects economic growth at 6.4 pc for the next fiscal
On the growth front, the RBI said that India's economic growth will slow down to 6.4 per cent in FY 2023-24 from 7 per cent in the current fiscal citing risks from geo-political tension and tightening global financial condition. According to RBI, the GDP will grow at 6.4 per cent during 2023-24 with a Q1 growth rate of 7.8 per cent, Q2-6.2 per cent, Q3-6 per cent and Q4-5.8 per cent.
"RBI's internal survey says manufacturing, services and infrastructure sector firms are optimistic of the business outlook. However, protracted geo-political tension, tightening global financial conditions and external demands continue as downside risks to the domestic outlook," Shaktikanta Das said, adding, "monetary policy will continue to be agile and alert to effectively address challenges to the economy."
According to Das, the inflation for the current fiscal 2022-23 will be at 6.5 per cent and for Q4 at 5.7 per cent. As regards the CPI inflation for the next fiscal, that is, 2023-24 at 5.3 per cent with Q1 at 5 per cent, Q2 at 5.4 per cent, Q3 at 5.4 per cent and Q4 at 5.6 per cent.
(With Agencies Inputs)