RBI's Announcement On monetary Policy For October 2021

Latest Updated on 09 February 2023

The Reserve Bank of India raised its base repo rate by 25 basis points on Wednesday, blaming strong core inflation. The Central Bank stated that the withdrawal of accommodation remains the primary goal of its policy stance. The major benchmark interest rate was raised by 35 basis points by the central bank in its review of Monetary Policy in December. In order to keep it under control, the Reserve Bank has raised the short-term lending rate by 250 basis points, including the rate in effect today.

The policy is in keeping with expectations and just what the doctor ordered. The RBI's approach and the interest rate change may help break core inflation persistence as core inflation stays sticky and Larger Global Central Banks continue to hike rates. This will improve the medium-term growth prospects of the Indian economy. The RBI projected a growth of 6.4% for FY24, subject to a normal monsoon and an average oil price of $95 per gallon. The RBI increased its growth projections for FY23 by 20 basis points to 7%. It's significant to note that the RBI expects an average 7% increase in H1 FY24. We do not expect any rate cuts in the calendar year 2023, even if the RBI is now expected to remain on hold.

Given the Poor External Account and an unstable Global Economy, the RBI will also need to be on the lookout for the spillover effects via INR. According to Dr. Sachchidanand Shukla, Chief Economist for the Mahindra Group, FPI selling resumed on January 23 with a net outflow of $3 billion.

Despite this increase, the RBI is still quite concerned about the possibility that core inflation would continue to be sticky. This shows that the governor of the RBI is wary of taking any chances with inflation. The Federal Reserve's position of not taking a chance with inflation also strengthens RBI's desire to take the lead. So, in order to keep the value of the Indian Rupee, we think that the RBI may decide to increase rates again in the upcoming monetary policy "said Sunil Damania, the company's Chief Investment Officer.

Last Updated on 09 October 2021

The Reserve Bank of India (RBI) kept its accommodative policy in place while keeping the benchmark interest rate at 4%. The Reverse Repo Rate is the interest rate at which the RBI borrows from banks for the short term. It is a tool used by the central bank to keep inflation under control. According to the Governor of the Reserve Bank of India Core inflation, remains stable. The MPC has maintained the key benchmark rate unchanged in its last seven assessments. For the eighth time in a row, the MPC has decided to keep the policy rate unchanged. The RBI's policy rate was last changed on May 22, 2020, during an off-policy cycle, in order to boost demand by dropping interest rates to a record low.