RBI hikes repo rate by 50 bps

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI), in its Monetary Policy review released on 5 August 2022, decided to

• raise the policy repo rate under the liquidity adjustment facility (LAF) by 50 basis points to 5.40 per cent, bringing it back to the pre-pandemic level.
• raise the standing deposit facility (SDF) rate by 50 basis points to 5.15 per cent.
• the marginal standing facility (MSF) rate consequently stands revised upwards by 50 basis points to 5.65 per cent.

The 6 member MPC voted unanimously in favour of the policy rate hikes. All members voted to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth. Prof. Jayanth Varma expressed reservations on this part of the resolution. The RBI’s medium-term target for consumer price index (CPI) inflation is 4 per cent within a band of +/- 2 per cent.