The Reserve Bank of India on Wednesday raised its key repo rate by 25 bps to 6.50% during its February meeting, the sixth-rate hike in a row. Headline Consumer Price Inflation (CPI) remains under the RBI’s upper tolerance limit of 6 per cent. There has been some moderation in food prices with annual inflation easing unexpectedly easing to 5.72% in December of 2022 from 5.88% in November, the lowest reading since December of 2021.
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.
The Reserve Bank of India Monetary Policy Committee (MPC) decision followed a 35-bps hike in December, 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.
The central bank also raised both the standing deposit facility (SDF) rate and the marginal standing facility (MSF) rate by 25 bps to 6.25% and 6.75, respectively.
Indian Inflation
Annual consumer price inflation in India unexpectedly eased to 5.72% in December of 2022 from 5.88% in November, beating market forecasts of 5.9%. It is the lowest reading since December of 2021, also marking the second straight month the inflation stays below the Reserve Bank of India target of 2-6%.
- Prices slowed for food (4.19% vs 4.67%), pushed down by a 15.1% fall in vegetables; clothing and footwear (9.58% vs 9.83%); and housing (4.47% vs 4.57%).
- Prices rose faster for fuel and light (10.97% vs 10.62%), pan, tobacco, and intoxicants (2.55% vs 2.02%), and miscellaneous (6.17% vs 6.07%).
- Compared to the previous month, the CPI went down 0.45%, the biggest decline since January of 2021.
Source: RBI
From The TradersCommunity Research Desk