SDF at 5.15 pc; MSF at 5.65 pc
BBN Bureau
MUMBAI/August 05-2022: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has on Friday (August 05-2022) effected a 50 basis points increase in the repo rate to take it up to 5.40 per cent matching that of August 07, 2019.
The three hikes in the past three months, starting from May 04 by 40 basis points, have thus raised the policy rate by 140 basis points from the level of 4 per cent.
The RBI governor, Shaktikanta Das (seen in the picture), commented that the central banks in the advanced countries too have been hiking policy rates and it looks now ‘raising 50 basis points’ has become a new normal.
The Standing Deposit Facility (SDF) rate is now at 5.15 per cent, while the Marginal Standing Facility (MSF) Rate stands at 5.65 per cent – a 50 basis points interest rate corridor represented by the SDF at the lower end and MSF at the upper end.
“Spillovers from geopolitical shocks are imparting considerable uncertainty to the inflation trajectory. More recently, food and metal prices have come off their peaks,” said the MPC’s statement.
“International crude oil prices have eased in recent weeks but remain elevated and volatile on supply concerns even as the global demand outlook is weakening. The appreciation of the US dollar can feed into imported inflation pressures.”
Consumer Price Index (CPI) inflation has remained above the upper band of the RBI’s mandated 2-6 per cent range with the June inflation print showing 7.01 per cent.
This is for the sixth straight month the inflation has remained overshot the RBI mandated range, as of June 2022, when inflation print was at 7.01 per cent. The upside risks to domestic inflation increased following the eruption of the Russia-Ukraine war in late February.
Inflation outlook
The RBI retained its CPI inflation forecast of 6.7 per cent for the current financial year, with risks evenly balanced. The CPI forecast assumes the average price of crude oil for the Indian basket at $105 per barrel.
CPI inflation is seen at 7.1 per cent in July-September, 6.4 per cent in October-December and 5.8 per cent in January-March, and projected to be at 5 per cent in the first quarter of 2023-24.
GDP
The MPC on Friday retained the real GDP growth forecast of 7.2 per cent for the current financial year. GDP growth for the first quarter of the next financial year is seen at 6.7 per cent.
