Post Monetary Policy Press Conference By RBI Governor Shaktikanta Das: Highlights

The Reserve Bank of India (RBI) on Friday raised the benchmark lending rate by 50 basis points to 5.40 per cent to tame inflation.

Following are the highlights of the RBI's fourth monetary policy review of fiscal year 2022-23 announced by Governor Shaktikanta Das:

• Key short-term lending rate (repo) raised by 50 basis points (bps) to 5.4 per cent; third consecutive hike
• In all, 140 bps hike in repo since May 2022 to check inflation
• GDP growth projection for 2022-23 retained at 7.2 per cent (pc).
• GDP growth projection: Q1 at 16.2 pc; Q2 at 6.2 pc; Q3 at 4.1 pc; and Q4 at 4 pc
• Real GDP growth for Q1:2023-24 projected at 6.7 per cent
• Domestic economic activity exhibiting signs of broadening
• Retail inflation projection too retained at 6.7 pc for 2022-23
• Inflation projection: Q2 at 7.1 pc; Q3 at 6.4 pc; and Q4 at 5.8 pc; Q1:2023-24 at 5 pc
• India witnessed large portfolio outflows of USD 13.3 billion in FY23 up to August 3
• Financial sector well capitalised and sound
• India's foreign exchange reserves provide insurance against global spillovers
• Monetary Policy Committee decides to remain focused on withdrawal of accommodative stance to check inflation
• Depreciation of rupee more on account of appreciation of US dollar rather than weakness in macroeconomic fundamentals of the Indian economy
• RBI to remain watchful and focused on maintaining stability of rupee
• Rupee depreciated by 4.7 pc against US dollar this fiscal year till August 4
• India's foreign exchange reserves remain fourth largest globally
• Mechanism to be activated to allow NRIs to use Bharat Bill Payment System for payments of utility and education on behalf of their families in India
• Next meeting of rate-setting panel scheduled for September 28-30, 2022.

• IMF has revised downwards economic growth projection and expressed risk of recession
• Indian economy has been grappling with high inflation
• India facing USD 13.3 billion capital outflow in last few months
• Financial sector remains well capitalised; India's forex reserves provide insurance against global spillovers
• MPC takes unanimous decision to raise benchmark lending rate by 50 bps to 5.40 per cent
• MPC decides to focus on withdrawal of accommodative policy stance to check inflation
• Consumer price inflation remains uncomfortably high; inflation expected to remain above 6 per cent
• Bank credit growth has accelerated 14 pc as against 5.5 per cent year ago
• Domestic economic activity showing signs of broadening; rural demand shows mix trend
• RBI retains its economic growth projection at 7.2 per cent for current fiscal
• Indian economy faces headwinds from global factors like geo-political risks
• Edible oil prices likely to soften further
• Inflation projection for FY23 retained at 6.7% on assumption of a normal monsoon and crude oil at $105 per barrel
• Rise in term deposit rates should increase liquidity for financial sector
• Surplus liquidity in the banking system has come down to Rs 3.8 lakh crore, from Rs 6.7 lakh crore in April-May
• Rupee has moved in orderly fashion, depreciating 4.7 pc till Aug 4; RBI remains watchful of INR movement
• FPIs after remaining in exit mode in first quarter have turned positive in July

• The rupee gains sharply early on Friday, reversing a sharp fall in the previous session, ahead of the Reserve Bank of India's policy announcement. 
• Bloomberg quoted the rupee at 78.9713 against the greenback, a gain of 50 paise from its previous close of 79.4713.
• PTI reported that the rupee rose 46 paise to 78.94 against the US dollar in early trade.
• The dollar struggled to gain a footing on Friday after falling by its sharpest pace in two weeks, as investors remained on tenterhooks ahead of the widely anticipated US jobs data and amid growing worries about a recession.
• The US dollar index, which measures the greenback against a basket of currencies, fell 0.68 per cent overnight, the largest fall since July 19, and last traded 105.79.

• The rupee is expected to strengthen against the U.S. dollar at open on Friday as oil prices extended their recent slide to slip to their lowest since February.
• The Reserve Bank of India (RBI) policy decision will set the intraday direction for the rupee, traders said.
• The rupee will likely open at 79.15-79.20 per dollar, up from 79.47 in the previous session.
• Brent crude on Thursday fell 2.8%, taking its losses this month to over 14%. Oil prices have come under pressure amid concerns over demand, pushing Brent crude to its lowest since before Russia's February invasion of Ukraine.
• "The ongoing correction in oil prices will be a major relief for the rupee. Specially right now, when worries over the trade deficit are significant," a trader at a private sector bank said.
• "Oil will help rupee to open higher and from there it will be down to what the RBI does."

• India's central-bank watchers agree that interest rates will be raised to pre-pandemic levels on Friday, yet they are split on the size of the increase aimed at fighting inflation and propping up a weak currency.
• Sixteen of 36 economists surveyed by Bloomberg see the Reserve Bank of India's six-member monetary policy committee lifting the repurchase rate by half-point to 5.40%, a level last seen in August 2019.
• Fourteen of them predict a 35-basis point hike, five a quarter-point action and one for a 40 basis-point increase -- with any of these moves seen enough to return borrowing cost to late 2019 levels.
• With Federal Reserve officials signaling a pause is out of the question until they see evidence of inflation easing, RBI watchers will be closely monitoring Governor Shaktikanta Das's remarks for any guidance on the pace and length of the monetary tightening cycle as he seeks to ensure a "soft landing" for the economy.
• The central bank has increased the key rate by 90 basis points since May, including a half-point hike in June.

• The rupee may decline to a new lifetime low versus the U.S. dollar if the Reserve Bank of India on Friday decides to opt for a smaller rate hike, a trader said.
• The RBI is widely expected to raise the repo rate as it continues its battle to control inflation.
• Economists, however, differ on the size of the rate hike that the RBI will deliver as the central banks aims to strike the right balance between inflation and growth.
• The estimates range from 25-basis points rate hike to 50-basis points.
• "We think there is decent chance that rupee will see a record low tomorrow," a trader at a Mumbai-based private sector bank said. "A 50-basis hike will not do much for the rupee, while anything less than that will take the rupee well below 80."

• The Reserve Bank of India is expected to raise interest rates today for the third time since the beginning of the current financial year, to bring down inflationary above the upper threshold of the central bank's target since January. 
• The focus shifts to the RBI's growth and inflation outlook and the tone of the monetary policy path.
• The Monetary Policy Committee (MPC) meeting started on Wednesday abd the RBI Governor Shaktikanta Das is scheduled to announce the Monetary Policy Committee decisions at 10 am.
• The RBI had said, it was removing the policies introduced as COVID-support, and if the central bank hikes by a minimum of 25 basis points then interest rates will rise to pre-pandemic level.
• While the hike in policy interest rates is almost certain, analysts and economists have different opinions on the extent of the rate hike.
• It varies between 25 basis points to 50 basis points.