Mumbai : The Reserve Bank of India’s Monetary Policy Committee (MPC) on Wednesday raised the repo rate by 25 basis points to 5.50%, its first rate hike since February 2023. The MPC unanimously voted for the rate increase after its three-day meeting on October 5-7. It also changed its policy stance to “calibrated tightening”, signalling that the central bank is no longer considering rate cuts in the near term.
“Inflation and its outlook are not as benign as they were last year,” Malhotra said, adding that headline CPI inflation is expected to average around 5.8% over the next three quarters, while inflation for the full financial year is projected at 4.4%. Malhotra said global growth remains resilient but is expected to slow this year, while rising energy and food prices are pushing global inflation higher and prompting monetary policy tightening by major central banks.
The governor said the Indian economy remains strong and its momentum is broad-based. “Nonetheless, the Indian economy has been strong and the economic momentum remains broad-based. Moreover, the economy is expected to remain resilient,” he said. Malhotra said there was some evidence of elevated inflation expectations and a broadening of price pressures, although there were still limited signs that supply-side pressures had become embedded in firms’ pricing behaviour.
The MPC also flagged risks from strong growth in monetary and credit aggregates, although it found limited evidence of demand-side inflationary pressures. Malhotra said the RBI’s next moves would depend on how inflation and growth evolve, rather than signalling a predetermined series of rate hikes. “Given the current conditions, rate cuts are off the table in the near term and policy action ahead can only be a rate hike or a pause depending on the evolving conditions and the outlook,” he said.
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