RBI Increases Repo Rate By 40 bps To 4.40% With Immediate Effect
Mumbai: The Reserve Bank of India’s (RBI) Governor Shaktikanta Das on Wednesday announced that the monetary policy committee has unanimously decided to increase the repo rate by 40 bps to 4.40% with immediate effect.
Das said, “The MPC continues to make adjustments with a focus on the return of housing to ensure that inflation remains within target. MPC’s decision today may be seen as a reversal of rate action of May 2020.”
The last hike in the repo rate was announced on August 1, 2018, when the central bank increased it by 25 bps to 6.5 per cent.
Consequently, the Permanent Deposit Facility (SDF) rate stands adjusted to 4.15 per cent and the Marginal Standing Facility (MSF) rate and Bank Rate to 4.65 per cent.
The RBI governor said that the International Monetary Fund (IMF) has noted the economic effects of the war and said that they are spreading like seismic waves. He further said that the global growth projections for this calendar year have been revised upwards by 100 basis points.
It’s worth mentioning here that Wednesday’s statement comes ahead of Federal Reserve Chairman Jerome Powell’s interest rate decision today, which is likely to see the US top bank’s most aggressive action to control inflation in decades.
Das highlighted that monetary policy has been in hyper-adjustable mode with a major reduction in the policy repo rate on March 27, 2020, followed by another reduction of 40 basis points on May 22, 2020, in response to the pandemic.
The rationale behind the MPC’s decision and stance include the global rise in inflation, geopolitical tensions, global crude oil prices above $100 per barrel, and high food prices among others.
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