RBI hikes repo rate to 6.25%, 5th increase in a row

New Delhi | The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) on Wednesday in a 5:1 decision increased the repo rate by 35 basis points (bps) to 6.25 per cent to contain inflation.

It is the fifth straight rate hike by the central bank in this financial year. Prior to this, the RBI had raised the repo rate by 40 bps in an off-cycle meeting in May and 50 bps in June, August and September.

The repo rate, also called the policy rate, is the interest at which RBI lends money to the commercial banks.

The RBI Governor Shaktikanta Das, heading the MPC, announced the rate hike and added that the battle against inflation was not over.

The MPC raised the retail inflation forecast for October-December 2022 period to 6.6 per cent from 6.5 per cent.

The retail inflation forecast for January-March 2023 period was raised to 5.9 per cent from 5.8 per cent.

The MPC though retained the retail inflation forecast for the first quarter of 2023-24 at 5 per cent and has kept it at 5.4 per cent for the second quarter of FY24.

Striking an optimistic note on the rupee, Das said in his speech that the currency has appreciated by 3.2 per cent during April-October in real terms, even as major currencies have depreciated.

“Rupee should be allowed to find its level,” he said.

FDI inflows rose to $22.7 billion in April to October 2022 from $21.3 billion in the corresponding period last year.

Slowing external demand weighing on India’s merchandise exports, he noted further.

“Size of our forex reserves is comfortable and has increased and they stand at $561.2 billion as on December 2,” Das informed.

IANS

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