In a surprise press conference held on Wednesday, Reserve Bank of India’s Governor, Shaktikanta Das, announced the increase of RBI’s repo rate. The RBI Monetary Policy Committee hiked the repo rate by 40 basis points. The change implies that the current repo rate is 0.4 percent.
During the press meeting, Governor Shaktikanta Das mentioned the financial impacts of the Russia-Ukraine war on India’s economy and the International Monetary Fund. The RBI is raising its benchmark rate, abandoning its accommodating posture, in response to rising demand. The Sensex dropped 1182 points as a result of this decision.
The RBI has been maintaining its liberal policy for the last two years. The monetary policy repo rate remained unchanged during the past 11 meetings till April 2022. In the previous meeting earlier this month, the monetary policy committee held its repo rate constant at 4%, while the reverse repo rate was 3.35%.
The RBI informed the media that the retail inflation rose by 7% post MPC meeting. This increase was mainly due to the rise in food prices. Another reason for high inflation is geopolitical stress. It has been a few months since the war between Russia and Ukraine started, and it severely affected the rise in the price of grains, especially wheat. The global supply chain has suffered as a result of this strain.