RBI raises rates, vows nimble policy

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RBI raises rates, vows nimble policy

  • The Monetary Policy Committee (MPC) of the Reserve Bank of India unanimously decided to raise the policy repo rate by 50 basis points (bps) to 5.4%.

Rationale for this decision:

  • Inflation is projected to remain above the upper tolerance level of 6% through the first three quarters of 2022-23, entailing the risk of destabilising inflation expectations and triggering second round effects.
  • Given the elevated level of inflation and resilience in domestic economic activity, further calibrated monetary policy action is needed to:
  • Contain inflationary pressures,
  • Pull back headline inflation within the tolerance band closer to the target,
  • Keep inflation expectations anchored so as to ensure that growth is sustained.
  • The MPC also said it would remain focused on “withdrawal of accommodation” to ensure that inflation remains within the target, while supporting growth.
  • The RBI retained its inflation and GDP growth projections for the current fiscal year ending in March 2023 at 6.7% and 7.2%, respectively.

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