In tandem with the US Fed and the European Central Bank, the Reserve Bank of India on Friday increased the policy repo rate, the third hike since the beginning of the current financial year, in order to tame the inflationary pressure.
The RBI-led Monetary Policy Committee hiked the repo rate by 50bps to 5.4%. With this, the benchmark rate has gone back to the pre-pandemic levels.
Announcing the decision of the 6-member MPC that met from August 3 to 5, RBI Governor Shaktikanta Das said the central bank will stay focused on withdrawal of accommodation to ensure that inflation stays within limits while supporting growth.
The standing deposit facility stays adjusted at 5.15% and the marginal standing facility and bank rate at 5.65%.
The RBI’s decision is in line with the monetary policy tightening by key central banks worldwide to combat inflation. Das said FY23 CPI inflation is projected at 6.7%.