RBI Monetary policy committee (MPC) Meeting- Highlights

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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