Reserve Bank of India (RBI) governor Shaktikanta Das on Wednesday announced that Monetary Policy Committee (MPC), in an unscheduled policy review with a view to contain inflation, voted unanimously to increase the policy repo rate by 40 basis points (bps) to 4.40 per cent with immediate effect. All six members of the MPC unanimously voted for a rate hike while maintaining the accommodative stance, Das said. While the inflation has remained above the targetted 6 per cent since January, Das said the inflation print in April is also likely to be high.
The retail inflation print for March stood at 6.9 per cent. The RBI has done the first rate hike since August 2018.The governor said the decision of MPC reversed the May 2020 interest rate cut by an equal amount. “Shortages and volatility in commodities and financial markets are becoming more acute,” Das said in an online briefing, adding that there is a risk price stay at this level for “too long” and expectations become unanchored. The bank’s next scheduled rate decision isn’t until June 8, reported Bloomberg. The government has intensified the battle against inflation that’s outpaced its expectations for much of the year. In its first unscheduled rate change since the depths of the pandemic, the RBI increased its repurchase rate to 4.40 per cent, from the record low 4 per cent its been held at for the past two years to support the economy. The RBI in April raised its inflation forecast to 5.7 per cent for the fiscal year that started April 1, up from its 4.5 per cent in February, and said it sees gross domestic product growth during the year at 7.2 per cent, compared with a previous expectation of 7.8 per cent.