: RBI hikes repo rate by 50 bps to 5.9% #FinanceIndia #StockMarketNEWS #Business Press Trust of India Mumbai The Reserve Bank of India on Friday raised benchmark lending rate by 50 basis points,

@StockMarketNEWS Mon 03 Oct, 2022

Posted in: #FinanceIndia #StockMarketNEWS #Business

RBI hikes repo rate by 50 bps to 5.9% #FinanceIndia #StockMarketNEWS #Business
Press Trust of India

Mumbai

The Reserve Bank of India on Friday raised benchmark lending rate by 50 basis points, the fourth straight increase since May, as it extended its battle to tame stubbornly high inflation.

The monetary policy committee (MPC), comprising three members from the RBI and three external experts, raised the key lending rate or the repo rate to 5. 90% the highest since April 2019 with five out of the six members voting in favour of the hike.

Since the first unscheduled mid-meeting hike in May, the cumulative increase in interest rate now stands at 190 basis points and mirrors similar aggressive monetary tightening in major economies around the globe to contain runaway inflation by dampening demand.

The MPC also decided by a majority of 5 out of 6 members to remain focused on the withdrawal of accommodative policy stance, said RBI Governor Shaktikanta Das. “The inflation trajectory remains clouded with uncertainties arising from continuing geopolitical tensions and nervous global financial market sentiments,??? he said.

“In this backdrop, MPC was of the view that persistence of high inflation, necessitates further calibrated withdrawal of monetary accommodation to restrain broadening of price pressures, anchor inflation expectations and contain the second round effects. This action will support the medium-term growth prospects of our economy. ???

Retail inflation remains elevated and above the upper tolerance band of the target due to large adverse supply shocks, some firming up of domestic demand, and the spillovers from global financial markets, he said adding recent corrections in global commodity prices including crude oil, if sustained, may ease cost pressures in coming months.

The central bank cut its forecast of India’s economic growth to 7% for current fiscal year from an earlier projection of 7. 2% largely because of headwinds from extended geopolitical tensions and tightening global financial conditions.

It however retained the retail inflation forecast at 6. 7% for 2022-23. Consumer price inflation (CPI) accelerated to 7% in August, driven by a surge in food prices, and has stayed above the RBI’s mandated 2-6% target band for eight consecutive months.

The rise in repo rates would translate into higher borrowing costs for corporates and individuals.

“The rise in rates will slow down capex plans of corporate India which were just about kicking off,??? said Anu Aggarwal, head of corporate banking at Kotak Mahindra Bank.

Das said the world has witnessed two major shocks in the last two and half years the COVID-19 pandemic and the conflict in Ukraine.