Reserve Bank of India Governor Shaktikanta Das announced on Wednesday that RBI has increased the repo rate by 25 basis points to 6.5%.
The RBI has raised interest rates for the sixth time in nine months and the highest since August 2018.
Announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) by a majority decided to raise the policy repo rate by 25 basis points and keep a 'strong vigil' on inflation outlook.
Inflation in a decent pace
Average Q4 inflation to be 5.6%, he added. Core inflation generally refers to inflation in manufactured goods.
The governor said the inflation will moderate in the next fiscal but remain above the 4 per cent level. The RBI is mandated to keep inflation at 4 per cent with a margin of 2 per cent on either side.
"Policy rate at 6.5 per cent still trails the pre-pandemic level," Das said, adding that core inflation will remain sticky.
"Unprecedented events of the last three years have put to test monetary policy across the world. Emerging market economies are facing sharp tradeoffs between supporting economic activity and controlling inflation while preserving policy credibility", he said.
Food inflation likely to ease in 2023-24, the Governor said during the briefing.
"The global economic outlook doesn't look as grim now as it did a few months ago, growth prospects in major economies have improved while inflation is on a descent though inflation still remains on well-above target in major economies."
For the next fiscal, the RBI projected a growth rate of 6.4 per cent. In the latest Economic Survey of the finance ministry, growth projection was 6-6.8 per cent for 2023-24.
According to Das, the retail inflation will average 6.5 per cent in the current fiscal and moderate to 5.3 per cent in 2023-24.
Indian economy has remained resilient demand global headwinds, Das said.
(To receive our E-paper on WhatsApp daily, please click here. To receive it on Telegram, please click here. We permit sharing of the paper's PDF on WhatsApp and other social media platforms.)