Reserve Bank Of India’s Monetary Policy Review:
The Monetary Policy Committee (MPC) of the Reserve Bank of India recently increased the repo rate by 35 basis points (bps) to 6.25%, and the Standing Deposit Facility stands raised to 6%.
- Since May, the board has now increased the key rate by 225 bps in FY23.
- A 100 basis points equal one percentage point.
- Retail price inflation in India reduced to 6.77 percent YoY in October 2022 from a five-month high of 7.41 percent in September, 2022.
- However, the fact that it continued to be above the central bank’s acceptable limit of 2 to 6 percent for a tenth consecutive period prompted RBI to raise the repo rate for the fifth time.
- Inflation is expected to be 6.7% this year, with CPI inflation for the first quarter of 2023-24 projected at 5% and the second quarter at 5.4% on the assumption of a normal monsoon.
- The central bank’s key committee also marginally lowered the GDP projection to 8% for 2022-23, with the third quarter registering 4.4% growth.
- The rupee has appreciated by 3.2% in real terms even as several other currencies have dropped.
Monetary Policy Committee:
- The Monetary Policy Committee of India is responsible for fixing the policy interest rate, to achieve the objectives of monetary policy.
- Composition: Three officials of the Reserve Bank of India, with Governor of RBI as Chairperson, ex officio
- Three external members appointed by the Government of India
- The external members hold office for a period of four years.