RBI policy 2023: A look at the existing repo rate, trends and other figures

RBI policy: Shaktikanta Das will announce the MPC decision today at 10 am


BS Web Team New Delhi
The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) will announce its policy decision shortly. The bi-monthly monetary policy meeting started on June 6 and the outcome will be announced by the Governor of the RBI, Shaktikanta Das at 10 am.

The main aim of the MPC is to keep inflation at 4 per cent. However, the range of 2 to 6 per cent is considered RBI's tolerance limit.

Between May 2022 and February this year, the repo rate has been hiked by 250 bps to 6.5 per cent. In April, the MPC decided to hit the pause button on rate hikes. RBI Governor Shaktikanta Das emphasised that it was a pause and not a pivot while retaining the possibility of further tightening.

Also read: Repo rate unchanged at 6.%: Full list of banks offering highest FD rates

The consumer price index-based (CPI) inflation – the main yardstick for monetary policymaking – in April declined to an 18-month low of 4.7 per cent year-on-year (YoY) (from 5.7 per cent YoY in March), well within the RBI's 2-6 per cent target band.

RBI policy 2023: A look at how repo rate has changed since May 2022

February 10, 2022

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The war in Ukraine had not broken out when the MPC announcement was made in February. The repo rate was kept unchanged at 4 per cent. The real gross domestic product (GDP) growth for FY23 was projected at 7.8 per cent. The CPI inflation for the year was projected at 4.5 per cent.

"Overall, taking into consideration the outlook for inflation and growth, in particular the comfort provided by the improving inflation outlook, the uncertainties related to Omicron and global spillovers, the MPC was of the view that continued policy support is warranted for a durable and broad-based recovery," Das said.

April 8, 2022

The war in Ukraine started in the last week of February. However, the RBI decided to keep the repo rate at 4 per cent. The GDP growth forecast was reduced to 7.2 per cent in FY23. The inflation forecast was hiked to 5.7 per cent. The average crude oil price was taken as $100 per barrel.

May 4, 2022

Due to high inflationary pressures on the back of the war in Ukraine, the RBI held an off-cycle meeting in May and decided to raise the repo rate by 40 bps to 4.4 per cent. In March, the retail inflation was 7 per cent.

"...the strengthening of inflationary impulses in sync with the persistence of adverse global price shocks poses upward risks to the inflation trajectory presented in the April MPC resolution," Das said.

June 8, 2022

In April, the retail inflation was recorded at 7.79 per cent. In May, it was still above 7 per cent at 7.04 per cent. In June, RBI announced a further repo rate hike by 50 basis points to 4.9 per cent.

The GDP growth forecast was retained at 7.2 per cent. The average crude oil price assumption was changed to $105 per barrel, and the inflation forecast for FY23 was also raised to 6.7 per cent. This was considerably higher than the 5.7 per cent announced in April.

"With no resolution of the war in sight and the upside risks to inflation, prudent monetary policy measures would ensure that the second-round effects of supply-side shocks on the economy are contained and long-term inflation expectations remain firmly anchored and inflation gradually aligns close to the target," Das said during the announcement.

August 5, 2022

The inflation fell below 7 per cent in July. However, core inflation continued to remain high. RBI continued with the rate hike and upped the repo rate by 50 bps to 5.4 per cent. It, however, said that it would focus on the "withdrawal of accommodation" to control inflation.

The GDP and inflation forecast for FY23 were retained at 7.2 per cent and 6.7 per cent, respectively.

September 30, 2022

After a brief respite, inflation went back to 7 per cent in August. RBI again raised the repo rate by 50 bps to 5.9 per cent and said it would remain "focused on the withdrawal of accommodation".

The GDP growth forecast was slashed to 7 per cent. The inflation forecast was retained at 6.7 per cent. However, the average crude oil price assumption was cut to $100 per barrel.

December 7, 2022

A 35 bps hike took the repo rate to 6.25 per cent. The inflation forecast has been retained at 6.7 per cent, but the GDP growth forecast has been further lowered to 6.8 per cent.

"GDP growth in India remains resilient and inflation is expected to moderate, but the battle against inflation is not over. Pressure points from high and sticky core inflation and exposure of food inflation to international factors and weather-related events do remain," Das said.

February 8

Das announced another rate hike of 25 bps, taking the key benchmark to 6.5 per cent. The MPC's decision was split 4-2. Das also announced that the MPC has decided to focus on the withdrawal of the "accommodative stance" as the "situation does not look so grim now".

April 6

For the first time since May 2022, the RBI MPC decided to pause the rate hikes. Das said that they are not ruling out the chances of a further rate hike but will watch the impact of previous ones before going for another raise.

First Published: Jun 8 2023 | 9:48 AM IST

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