RBI Monetary policy committee (MPC) Meeting- Highlights

August 6, 2022

The Monetary Policy Committee (MPC) held meeting on August 5, 2022. On the basis of assessment of current and evolving macroeconomic situation, MPC has decided to:

Hike policy repo rate by 50 basis points, under liquidity adjustment facility (LAF). Repo rate now stands at 5.40%.
Adjust Standing deposit facility (SDF) rate to 5.15%, marginal standing facility (MSF) rate to 5.65% and Bank Rate to 5.65%.
Focus on withdrawal of accommodation, in a bid to ensure that inflation is within the target onwards.

MPC decision are in line with the goal of attaining medium-term target for consumer price index (CPI) inflation to 4% within a band of +/- 2%, while supporting growth. These decisions were taken by considering that;

Global economic and financial environment has worsened, since MPC’s June 2022 meeting. Monetary policy tightening worldwide and persisting war in Europe has increased the risk of recession.
Emerging market economies are experiencing capital outflows and reserve losses which are intensifying the risks to their growth and financial stability.
Domestic economic activity is strong. South-west monsoon rainfall is 6% above the long period average, as of now. Kharif sowing is lifting. Demand across urban areas is strengthening while rural demand is gradually increasing.
CPI inflation decreased to 7.0% (year-on-year), during May-June 2022 as compared to 7.8% in April. Food inflation has witnessed some moderation.

Monetary Policy Committee (MPC):

MPC fixes the benchmark interest rate in India, by holding meetings for at least 4 times a year. Its decisions are published after each meeting. It has 6 members- 3 officials of RBI and 3 external members nominated by central government.

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