The Reserve Bank Of India (RBI) has increased the repo rate by 50 basis points to 4.90%. The decision has been made after Monetary Policy Committee’s meeting on Wednesday. RBI’s decision is not a stunner as many polls and economists were expecting a 40 basis point hike.
RBI has reduced the repo rate in March 2020, with an intention to ease the impact of lockdown and stabilised the repo rate for nearly two years before raising it on May 4, 2022. Almost all the polls and economists were expecting that MPC will decide to hike the repo rate due to high inflation in the country.
In an interview RBI Governor, Shaktikanta Das said, “ We expect the RBI to hike repo rate by 40 bps in the June policy meeting. However, we should be open for a rate hike between 35-50 bps hinging on how the MPC wants to reach the pre-pandemic repo rate of 5.15 per cent or around that mark by the end of August policy. The RBI is likely to hike the CRR in one of the upcoming policies but will be contingent on how it sees the durable liquidity panning out over the next few months”
RBI’s Monetary Policy Committee had decided to increase the repo rate by 40 basis points in a monetary policy review meeting held last month. While in the April review meeting, the committee had decided to keep the repo rate at 4%.