MPC announced Monetary Policy Statement

Today (i.e. 07th December 2022), the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI), has announced its monetary policy statement. MPC has increased the policy rate (repo rate) by 35 basis points with immediate effect. This takes the repo rate to 6.25 per cent.

As a result, the Standing Deposit Facility (SDF) rate is adjusted to 6 per cent, also the Marginal Standing Facility (MSF) rate and the Bank Rate to 6.50 per cent.

The MPC stated that “MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth”

MPC has revised their projected real GDP growth for 2022-23 is projected from 7 per cent to 6.8 per cent (with Q3 at 4.4 per cent and Q4 at 4.2 per cent). MPC stated that this projection is made with risks evenly balanced.

Projected GDPSource: MPC statements, Reserve Bank of India

They also projected that for the Q1 and Q2 of 2022-23 and stated that “Real GDP growth is projected at 7.1 per cent for Q1:2023-24 and at 5.9 per cent for Q2”

MPC has retained the inflation projection at 6.7 per cent. It also stated that inflation will remain above the target (i.e. 4%) for the next twelve months. The MPC claimed that economic activity is expected to be resilient, supported by domestic demand.

Projected InflationSource: MPC statements, Reserve Bank of India

 The MPC is of the view that monetary policy action is necessary to break the persistent core inflation, anchor inflation expectations and strengthen medium-term growth.

All members, except Prof. Jayanth R. Varma, of MPC have voted in favour of this rate hike.

All members, excluding Dr Ashima Goyal and Prof. Jayanth R. Varma, voted in favour to remain focused on the withdrawal of accommodation to ensure that inflation remained within target in future.

This is the fifth (5th) hike this year. The Governor of RBI stated that Worst Inflation are over and MPC is supporting growth.