This is the first such unscheduled statement from the RBI governor since the start of the pandemic in 2020
AMN / WEB DESK
Reserve Bank of India (RBI) today announced a 40-basis-point hike in the key lending rate and raised the cash reserve ratio by 50 basis points in an unscheduled announcement.
One basis point is one hundredth of a percentage point. The revised repo rate now stands at 4.40 percent and the CRR at 4.5 percent.
Reserve Bank of India governor Shaktikanta Das while announcing the decision said that global inflation is expected to remain high in April and RBI’s policy actions are an attempt to curb inflation and maintain growth. He added that MPC decided to hike the Cash Reserve Ratio (CRR) by 50 basis points to 4.5%. CPI inflation climbed to 6.95 per cent in March while WPI (wholesale price index) inflation touched 14.55 per cent in the same month. Economists and market experts have pointed out that the central bank needs to hike rates by 50 basis points in the upcoming June monetary policy meeting. Shaktikanta Das’ decision comes just ahead of the US Federal Reserve policy meeting, where the Jerome Powell-led FOMC is expected to initiate the rate hike cycle.
Inflation
Inflation must be tamed to keep the Indian economy resolute, said RBI Governor Shaktikanta Das. He added that efforts to maintain price stability would help financial and macroeconomic stability.
Growth positive
Policy decisions of today are aimed at re-anchoring inflation expectation and will eventually result in the strengthening of growth prospects, said RBI Governor Shaktikanta Das. He added that MPC decision growth is positive.
CRR raised
RBI decided to increase cash reserve ratio (CRR) by 50 bps to 4.5%, said RBI Governor Shaktikanta Das.
The surprise move came ahead of an expected rate hike from the US Federal reserve and in the backdrop of retail inflation persistently staying above the central bank’s comfort zone.
This is the first such unscheduled statement from the RBI governor since the start of the pandemic in 2020. The announcement surprised the markets, pushing up bond yields and putting pressure on the equity indices.
Repo is the rate at which the central bank lends short-term funds to banks. The RBI has cut the repo rate by 250 basis points since February 2019 to help revive the growth momentum. The Monetary Policy Committee has been on a prolonged accommodative stance to support growth.
In that sense, today’s announcement confirms the clear reversal of the rate cycle.
“I would like to emphasise that the monetary policy action is aimed at containing inflation spike and re-anchoring inflation expectation,” Das said. “High inflation is known as detrimental to growth.”
The governor, however, added that monetary stance remains accommodative and actions will remain