RBI Governor Shaktikanta Das on Friday announced the hike in repo rate by 50 bps to 5.40 per cent with immediate effect. In his speech, he said the Monetary Policy Committee (MPC) decided to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.


Das during his address said that inflation is expected to remain above the RBI’s 6 per cent threshold in the second and third quarters of this fiscal year, for which the MPC stressed that sustained high inflation could destabilise inflation expectations and harm growth in the medium term.


According to the governor, volatility in global financial markets is impinging upon domestic financial markets leading to imported inflation. “MPC decided to focus on withdrawal of accommodation to keep inflation within target while supporting growth,” the governor said.


Here is the full speech of RBI Governor Shaktikanta Das:


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Marginal Standing Facility (MSF) and bank rates have been revised at 5.65 per cent, while SDF rate was adjusted to 5.15 per cent.


On inflation, the governor pointed out consumer price index (CPI) inflation remains uncomfortably high and is expected to remain above 6 per cent. He said consumer price inflation has eased from its surge in April but remains uncomfortably high and above upper threshold of target.


He mentioned CPI forecast for FY23 has been kept unchanged at 6.7 per cent, while CPI inflation for Q1- FY23-24 is projected at 5 per cent.


Yields on India's 10-year bonds rose 7 basis points to 7.23 per cent after MPC raised the repo rate by 50 basis points, Das said.


In its release, the RBI said, "Overall system liquidity continues in surplus, with average daily absorption under the LAF at ₹3.8 lakh crore during June-July. Money supply (M3) and bank credit from commercial banks rose (y-o-y) by 7.9 per cent and 14.0 per cent, respectively, as on July 15, 2022. India’s foreign exchange reserves were placed at $ 573.9 billion as on July 29, 2022.”


"FDI inflows also improved to $13.6 billion in Q1 this fiscal, against $11.6 billion in the corresponding period last year," said, Das.


In his address, Das also proposed to enable Bharat Bill Payment System to accept cross-border inward bill payments. This will enable NRIs to undertake bill payments for utilities, education and other such payments on behalf of their families in India. This will benefit the senior citizens in particular.


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