RBI Monetary Policy Review- Highlights

Monetary Policy Committee (MPC) of the Reserve Bank of India, recently decided to increase the Policy Repo Rate by 50 basis points to 4.9 per cent in June 2022.

Key Facts

  • MPC members voted unanimously to increase rates and to continue withdrawal of accommodative stance.
  • According to MPC, inflation is likely to remain above 6 per cent, for the first three quarters in financial year 2022-23.
  • In May 2022, RBI increased the repo rate or short-term lending rate by 40 basis points, for checking spiralling inflation.

Monetary Policy Committee

Monetary Policy Committee fix the benchmark interest rates in India. The committee held at least 4 times a year (or at least once a QUARTER). Its decisions are published after each meeting.

Members of the MPC

The MPC has six members-

  1. 3 officials of the Reserve Bank of India and
  2. 3 external members nominated by Government of India.

The members are required to observe a “silent period” seven days before and after their decision on rate, in order to maintain “utmost confidentiality”.

Who is the chairperson ex officio of MPC?

The Governor of RBI act as the chairperson ex officio of MPC.

Decisions by the MPC

MPC take decisions by majority, where Governor put the casting vote in case of a tie.

Act constituting MPC

The Monetary Policy Committee was constituted by the Reserve Bank of India Act, 1934. This act was amended by Finance Act (India), 2016, to set up MPC, which helps in bringing more transparency and accountability in fixing Monetary Policy of India.

To whom MPC is answerable?

MPC is answerable to the Government of India, in case inflation exceeds the prescribed range for three consecutive quarters.

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