RBI retains GDP growth forecast; repo rate now above pre-Covid levels
Premium- Analysts had expected the central bank to increase its key interest rate from anywhere between 25 basis points and 50 basis points.
The monetary policy committee of Reserve Bank of India (RBI) today decided to increase repo rate, the main lending rates to banks, by 50 basis points to 5.4% with immediate effect. The central bank also retained its GDP growth outlook for this fiscal. To curb inflationary pressures, the Reserve Bank of India has so far raised the repo rate by 140 basis points since embarking on a tightening cycle at an unscheduled policy meeting in May this year. The repo rate before the pandemic came was 5.15%.
RBI retained GDP growth forecast at 7.2%. Though the Indian economy has been impacted by global economic situation, RBI Governor Shaktikanta Das said, the economic recovery in India is showing signs of broadening.
After the repo rate hike, the Standing Deposit Facility rate and the Marginal Standing Facility Rate were accordingly adjusted higher by the same quantum to 5.15% and 5.65%, respectively.
Analysts had expected the central bank to increase its key interest rate from anywhere between 25 basis points and 50 basis points.
The retail inflation in India has remained above 7% for the last three months but has eased from eight-year high of 7.79%, hit in April.
Bond yields in India rose after the RBI rate hike announcement. The benchmark 10-year bond yield climbed to 7.23%, from 7.1073% earlier today. However, equity markets held on to the early gains, with Sensex up over 200 points.
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