Reserve Bank of India increased repo rate by 35 basis points

The Reserve Bank of India (RBI) increased the repo rate by 35 basis points to 6.25% on December 7, 2022, for the fifth consecutive time. 

The key interest rate increased by a total of 190 basis points. Since June 2022, it has hiked by 50 basis points thrice and once by 40 basis points during an off-cycle meet in May 2022. The central bank increased the rate after inflation continues to remain above its tolerance band. 

At the Monetary Policy Committee announcement, Governor Shaktikanta Das said that the FY23 real GDP forecast has decreased to 6.8%, which is 0.1% lower than the revised estimates issued by the World Bank on December 6, 2022. 

Central bank's action in line with market expectations, says RBI Governor Shaktikanta Das after 35 bps hike in repo rate

— Press Trust of India (@PTI_News) December 7, 2022

Increased repo rate: All you need to know

1.  The RBI has maintained an FY23 Consumer Price Index (CPI) inflation forecast at 6.7%

2.  Governor Das said that he expects inflation to moderate as the winter harvest arrives.

3.  He also said that the RBI is prepared to undertake liquidity operations to incorporate liquidity, but it will for durable signs of turns in the liquidity cycle.

4.  The Rupee is stable, but there are requirements to focus on the orderly examination of the exchange rate. The forex exchange reserves have risen by USD 36.7 Billion.

5.  The chief of RBI praised the Indian economy’s performance in the face of global issues including the Ukraine war and the crisis caused by the Covid-19 pandemic. He also underlined that India is the fastest-evolving economy in Asia this year. 

What do you mean by repo rate?

The repo rate is the interest rate at which a country's central bank loans money to commercial banks. The Reserve Bank of India (RBI), India's central bank, employs repo rates to control liquidity in the economy. The Repo rate is connected to the repurchase option' or repurchase agreement' in banking.

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