RBI MPC Outcome | Key Highlights From Governor Shaktikanta Das' Speech

The RBI has retained the GDP growth at 7.2 per cent, while inflation projected at 6.7 per cent for FY23

Reserve Bank of India Governor Shaktikanta Das during the announcement of the MPC outcome, on Wednesday.

The six-member Monetary Policy Committee (MPC) headed by the Reserve Bank of India (RBI) Governor Shaktikanta Das on Wednesday (June 8) unanimously raised the repo rate, the key policy rate at which the central bank lends short-term funds to banks, by 50 bps to 4.90 per cent.

In his address, Das said that the central bank has retained the GDP growth at 7.2 per cent, while inflation projected at 6.7 per cent for FY23, while adding that an upside risk to inflation persists. A recent spike in tomato prices and crude oil rates are fuelling inflation. 

Here are the key highlights from RBI Governor Shaktikanta Das' speech on MPC announcements

• Repo rate hiked by 50 bps
• MPC voted unanimously to hike repo rate by 50 bps
• SDF rate adjusts to 4.65%, MSF at 5.15%
• MPC unanimously decided to focus on withdrawal of accommodation
• Repo rate still remains at pre-pandemic level
• Necessary to be sensitive to new realities
• Our steps will be measured
• Will remain proactive in mitigating geopolitical risks

OVERSEAS FACTORS

• Facing new challenges due to war in Europe
• War has led to globalisation of inflation
• Europe war to keep commodity prices elevated
• Global stagflation concerns are growing
• Emerging markets seeing depreciation of their currencies
• Europe war dampening trade globally

INFLATION

• Latest survey shows significant fall in inflation expectations
• FY23 CPI inflation seen at 6.7%
• Upside risks to inflation persist
• Cut in VAT on petrol, diesel can lower inflation expectation
• 75% rise in inflation expectations can be attributed to food
• Apr-Jun CPI inflation seen at 7.5%
• Jan-Mar CPI inflation seen at 5.8%
• Jul-Sep CPI inflation seen at 7.4%
• New inflation projection assumes a normal monsoon
• Oct-Dec CPI inflation seen at 6.2%
• Inflation has increased steeply beyond tolerance levels
• Europe war causing food, fuel prices to stay elevated
• Will remain focussed on bringing inflation closer to target
• MPC noted inflation to remain above 6% till Oct-Dec
• Upside risks to inflation in May materialised earlier
• Fuel excise cut, other steps by government to help ease inflation
• Further monetary policy measures needed to anchor inflation
• Inflationary pressure remains broad-based led by supply shocks
• MPC felt higher inflation could trigger inflation expectations
• Inflationary pressures driven by supply shocks

ECONOMY

• Indian economy has remained resilient
• Recovery gained momentum despite war, pandemic
• Domestic activity picking up despite inflation pressure
• Recovery in domestic economic activity remains firm
• Available information shows domestic economic recovery firm
• PMI for May points towards economic recovery
• Urban demand recovering, rural demand gradually improving 
• Credit cards, starting with RuPay credit cards, can now be linked to UPI