Addressing the media, RBI Governor Shaktikanta Das informed that all the six members of the Monetary Policy Committee (MPC) unanimously voted for the latest rate hike, adding that repo rate remains below the pre-pandemic level.
The repo rate is the rate at which the central bank lends money to commercial banks while the CRR is a certain minimum amount that banks have to deposit as reserves with the central bank.
ast month, the six-member Monetary Policy Committee led by Das in an off-cycle monetary policy review had raised the repo rate or short term lending rate by 40 basis points to check spiralling inflation. It was the first rate hike after August 2018. The central bank had also hiked cash reserve ratio (CRR) by 50 basis to 4.50 per cent.
Inflation
Das said that the war in Ukraine has led to the globalisation of inflation, adding that “our steps will be calibrated, focussed on bringing down inflation to target level”.
“Inflation is likely to remain above 6 per cent in the first three quarters of current fiscal,” the RBI Governor said.
The Consumer Price Index (CPI) based inflation, which RBI factors in while arriving at its monetary policy, is on the rise since October 2021. Retail inflation has remained above RBI’s upper tolerance level of 6 per cent since January. It had soared to an 8-year high of 7.79 per cent in April.
The government has tasked the central bank to ensure retail inflation remains at 4 per cent with a margin of 2 per cent on either side.
With an aim to cushion the impact of lockdown, RBI had slashed the repo rate by 75 basis points to 4.40 per cent in March 27, 2020 from 5.15 per cent. On May 22, 2020, RBI again cut the repo rate by 40 basis points and brought it down to 4 per cent. Thereafter, it maintained status-quo in the benchmark interest rate for almost two years before increasing it on May 4, 2022.
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