Mumbai: To contain the soaring inflation, the Reserve Bank of India (RBI) on Wednesday raised the benchmark interest rate by 50 bps basis points while keeping FY23 GDP growth forecast unchanged at 7.2%.
The hike, which was voted unanimously by Monetary Policy Committee in its June bi-monthly meeting, took the policy repo rate to a two-year high of 4.9%. The rate hike comes on the back of a 40 bps increase effected by RBI at an unscheduled meeting on May 4.
Repo rate is the rate at which the central bank lends money to commercial banks in the event of any shortfall of funds. It is used by monetary authorities to control inflation.
The Standing Deposit Facility has been adjusted to 4.65 per cent and the Marginal Standing Facility (MSF) to 5.15%.
The RBI has also revised its projection to 6.7% from the earlier estimate of 5.7% as the protracted nature of the Russia-Ukraine war puts pressure on commodity prices globally. “Inflation is likely to remain above 6% in the first three quarters of the current fiscal. Our steps will be calibrated, focussed on bringing down inflation to the target level,” said RBI Governor Shaktikanta Das.
The Gross Domestic Product growth has been estimated at 8.7% in 2021-22, he added.
Notably, the Work Bank on Tuesday slashed the GDP growth forecast for India to 7.5%, citing rising inflation, supply chain disruptions and geopolitical tensions.
Also Read: World Bank Further Lowers India’s Economic Growth Forecast For FY23
