Fight against inflation to continue. The Reserve Bank of India (RBI) has significantly increased its key lending rate, also known as the repo rate (the rate at which RBI lends money to meet their short-term funding needs, from 0.35 percent to 6.25 percent. This is a rise of 35 basis points (bps).
This decision was taken by the six-member monetary policy committee (MPC) headed by the RBI Governor. The committee has three members from the RBI and three outside members. Of the six members majority, six voted for the decision.
The committee also hiked the facility rate and the marginal standing facility rate by 6.0 and 6.5 percent respectively. RBI has related this to the slowing price pressures.
It appears to be in accordance with the broad market expectations for a moderation in rate hikes as the Central Bank had frontloaded its tightening policy, with predictions for inflation to have likely peaked in September and favorable base effects guiding the price rise trajectory to below 6 percent from early next year.
Shaktikanta Das said that inflation continues to rise. Hence the battle against inflation will continue further as the risks are still there. MPC has now changed its adjusting attitude.
The Governor’s statement comes amid expectations that price pressures have likely peaked and concerns around economic growth resurfaced.
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