RBI MPC Meeting Today.

December 2022 RBI Monetary Policy Committee Meeting: The repo rate was increased by 35 basis points (bps) to 6.25 percent with immediate effect by the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) on Wednesday, according to RBI Governor Shaktikanta Das.

Since August 2018, the RBI policy rate has now reached its highest level.

The central bank has raised rates five times this fiscal year. The repo rate had already been increased by the RBI by 40 basis points in an off-cycle meeting in May and by 50 basis points in June, August, and September.

Most market analysts anticipated that the MPC will increase the repo rate by 35 basis points at this meeting in order to rein in the runaway inflation, which in October remained to remain above the 6% threshold for the tenth consecutive month.

The MPC agreed to keep its attention on the withdrawal of accommodations, the RBI governor noted, and the standing deposit facility (SDF) rate, the marginal standing facility (MSF) rate, and the bank rate have all been modified to 6.50 percent.

The RBI governor stated in his speech that the policy rate is still accommodating and that core inflation is showing signs of stickiness. The prediction for inflation over the medium term is susceptible to climatic changes and world events.

In his comments on India’s economic expansion, Das stated that the manufacturing, services, and rural sectors all contribute to the expansion.

“The agricultural industry is still strong. India’s manufacturing and services PMI was among the highest in the world in November. Government capital expenditures will promote investment activity going forward, he said.

According to Das, the RBI expects GDP to rise by 6.8% in the current fiscal year (FY23). The growth was less than the earlier RBI forecast of 7%.

In spite of a slight lower revision to GDP growth, which is now projected to be 6.8%, he continued, India would continue to have the fastest rate of development among developed nations. Das predicted that the central bank will respond swiftly in the economy’s best interests. In contrast to the overall backdrop, the predicted 6.8% growth in FY23 represents a fairly strong economic impulse.

Das said the RBI expects the FY23 CPI estimate to be 6.7% when addressing inflation. It is still the same as the central bank’s earlier assessment.

The CPI inflation projection for the quarter of October to December (Q3) was increased from 6.5 to 6.6%, and the forecast for the quarter of January to March (Q4) was increased from 5.8 to 5.9 percent.

The retail inflation projection for the July-September quarter (Q2 FY24) is seen at 5.4 percent, while the CPI inflation forecast for the April-June quarter (Q1 FY24) was kept at 5.0 percent.

Das added that the liquidity conditions are expected to improve and that the RBI is prepared to carry out liquidity adjustment facility (LAF) operations to inject cash into the system. He claimed that system liquidity is still in excess.