Reserve Bank of India Hike Rates Fifth Time in a Row to 6.25%

The Reserve Bank of India meets on Wednesday and raised its key repo rate by 35 bps to 6.25% during its December meeting, the fifth-rate hike in a row. Headline Consumer Price Inflation (CPI) remains outside the RBI’s upper tolerance limit of 6 per cent. There has been some moderation in food prices with annual inflation easing to 6.77% in October, down from September’s five-month high of 7.41%. 

With the US dollar pulling back from its rampage the reprieve from currency weakness did not no deter the RBI from higher hikes. The rupee depreciated over the past year with the hawkish the Fed pivot.

RBI

The Reserve Bank of India Monetary Policy Committee (MPC) decision followed a 50-bps hike in September, bringing the rate to level not seen since March 2019, in line with global central banks tightening rates. Policymakers stepped up efforts to bring down inflation which has stayed above the upper end of the central bank’s target this year.

India Interest Rate

The central bank also raised both the standing deposit facility (SDF) rate and the marginal standing facility (MSF) rate by 35 bps to 6% and 6.5, respectively.

Indian Inflation

The RBI maintained its inflation forecast for FY 2023 at 6.7% while revised lower its economic growth to 6.8% from 7.0%.

Retail inflation based on CPI eased to 6.77 percent year-on-year in October 2022, down from September’s five-month high of 7.41 percent, helped by slower rises in food prices and a strong base effect. The reading came in slightly above market expectations of 6.73 percent and remained above the central bank’s 2-6 percent target range for a 10th consecutive period.

India Inflation Rate
  • Prices increased at a softer rate for food (7.01 percent vs 8.60 percent in September), fuel and light (9.93 percent vs 10.39 percent), pan, tobacco and intoxicants (1.87 percent vs 1.98 percent), and miscellaneous (5.90 percent vs 6.06 percent).
  • Inflation was little changed for housing (4.58 percent vs 4.57 percent) and clothing and footwear (10.16 percent vs 10.17 percent).
  • On a monthly basis, consumer prices rose 0.80 percent in October, the most since May

Source: RBI

From The TradersCommunity Research Desk