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Wednesday, July 06 2022
Economy

Repo rate up 50 bps, inf. over tolerance level till Q3FY23 - 2 min read

Repo rate up 50 bps inf over tolerance level till Q3FY23
Photo Credit : IANS

New Delhi: The Reserve Bank of India has raised the repo rate by 50 basis points to 4.9 per cent, Governor Shaktikanta Das said on Wednesday, adding that inflation was likely to remain above the upper tolerance level for three quarters of this financial year.

He was speaking at a press conference after the end of the three-day monetary policy review meeting that started on Monday.

Though the RBI raising policy rates in the ongoing monetary policy committee meeting was a “no brainer”, as said by its Governor Shaktikanta Das in a recent interview, investors, however, awaited the actual degree of percentage hike before taking fresh positions and future course of action in the financial markets.

In early May, the RBI, in a surprise off-cycle meeting, hiked the repo rate by 40 basis points (bps) to 4.40 per cent, amidst rising inflation concerns in the economy. Repo rate is the rate at which the central bank lends short-term funds to banks.

In the same off-cycle meeting, case reserve ratio was hiked by 50 basis points to 4.5 per cent essentially to squeeze out some liquidity from the system.

India’s retail inflation accelerated to 7.79 per cent in April, remaining above the tolerance limit of the central bank RBI for a fourth month in a row. It is highly likely that the retail inflation will remain above 6 per cent for another few months.

Das on Wednesday categorically said India’s retail inflation is likely to stay above the tolerance level till third quarter of FY23 before moderating below 6 per cent.

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For FY23, RBI sees overall inflation at 6.7 per cent, with 7.5 per cent in Q1, 7.4 per cent in Q2, 6.2 per cent in Q3, and 5.8 per cent in Q4, taking into consideration the normal monsoon and average crude oil basket price of $105 per barrel.

Notably, wholesale inflation in the country has been in double-digit for over a year now.

Coming to growth, India’s real GDP growth in FY23 is seen at 7.2 per cent, will be 16.2 per cent in Q1, 6.2 per cent in Q2, 4.1 in Q3, and 4.0 in Q4, with risks broadly balanced, Das said.

 

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