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Chennai, Dec 7 The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) on Wednesday in a 5:1 decision increased the repo rate by 35 basis points (bps) to 6.25 per cent to contain inflation.The repo rate, also called the policy rate, is the interest at which RBI lends money to the commercial banks.RBI Governor Shaktikanta Das, heading the MPC, announced the rate hike and added that the battle against inflation was not over.With this the MPC has increased the repo rate by 225 points this fiscal."Consequently, the standing deposit facility (SDF) rate stands adjusted to 6 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.50 per cent," Das said.The MPC also decided by a majority of 4 out of 6 members to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.Considering the falling commodity prices in the global markets, uncertainty as to geo-political hostilities, outlook for the US dollar and imported inflation, resurgence in domestic services sector and the crude oil price at $100/barrel, the RBI pegged the headline inflation at 6.7 per cent in 2022-23, with Q3 at 6.6 per cent and Q4 at 5.9 per cent.The Consumer Price Index (CPI) inflation for Q1FY24 is projected at 5 per cent and for Q2 at 5.4 per cent, on the assumption of a normal monsoon, Das said.The MPC also pegged the gross domestic product (GDP) growth for this fiscal at 6.8 per cent with Q3 at 4.4 per cent and Q4 at 4.2 per cent.The real GDP growth is projected at 7.1 per cent for Q1FY24 and at 5.9 per cent for Q2."Even after this revision in our growth projection for 2022-23, Ind ia will still be among the fastest growing major economies in the world," Das said.When queried about the difference in GDP growth projections between RBI and the World Bank Das said the difference is very marginal and we do not have the data on which the World Bank had based its projection.Das said the current account deficit (CAD) is manageable.Terming the Indian economy resilient and the inflation moderate Das said the battle against inflation will continue, keeping the economic growth aspect in sight.According to him, the MPC has taken the decisions based on the data and it would also assess the evolving future scenario.The upward revision in the interest rate was in line with expectations of the economic experts and industry officials."The moderation in rate hike by RBI is very much on expected lines. With CPI inflation likely to moderate further supported by base effect and the relief provided by easing global commodity prices, RBI could moderate the pace of rate hike," Rajani Sinha, Chief Economist, CARE Ratings, told .She said as the core inflation and household inflationary expectations still remain high, the RBI would remain vigilant on the inflation front."With India's external demand feeling the pinch of global s lowdown, RBI has aptly revised downwards the GDP growth projection for FY23," Sinha said.According to her, going forward, RBI's policy decision would not ju st be dependent on domestic data but also the developments on the global front."As real rate of interest moves to the positive territory, RBI woul d like to wait and watch the implications of the rate hikes so far. Given the looming uncertainties on inflation front, we feel that a further 25 bps rate hike in February cannot be ruled out," Sinha said.Reacting to rate hike K. Joseph Thomas, Head Research, Emkay Wealth told : "The 35 bps hike in repo rate takes the base rate to 6.25 per cent. This will push the short term rates higher. In line with expectations but the overall stance looks relatively moderate compared to earlier policy pronouncements given the inflation outlook better."Persistence of inflation due to higher oil prices still remains a risk. Also, the weak Rupee may transmit some inflation into the domestic economy, he said.He said 10 year benchmark yield may be in a broad range of 7.25-7.45 per cent, Thomas added."No real surprise with 35 bps indicating that the fight against inflation is not yet over but there is hope of a downward trajectory. Therefore not 25 or 50 bps. Growth projections lower at 6.8 per cent and while magnitude is marginal indicates still resilience on balance," Madan Sabnavis, Chief Economist, Bank of Baroda told ."These are relevant observations given that the World Bank has scaled up projections just yesterday. Stance continues to be withdrawn which is relevant here as we are still in surplus though lower than three months back," he added."There is assurance that RBI will provide liquidity when required as it tracks standing deposit facility (SDF) and variable rate reverse repo (VRRR) balances. On the whole, it is good for markets, Sensex up with announcement. GSec yields up marginally mirroring the rate hike," Sabnavis remarked.Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor

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