June 08, 2022
As per the latest developments, the Reserve Bank of India (RBI) has yet again increased the Repo Rate. A month back, the repo rate was increased to 40 BPS from 4 to 4.4. Today, again RBI increased the repo rate to 50bps and now the new Repo rate stands at 4.9 per cent. Yet again, RBI has claimed the issue of inflation as the biggest reason for the quick increase of the Repo rate.
V K Vijayakumar, Geojit Financial Services, said: “Up to a 50 bp rate hike by the RBI is already discounted by the market and, therefore, the central bank’s guidance on inflation and rates will be more important. Inflation for FY23 is likely to be around 6.8 per cent forcing the RBI to sound hawkish. For the market, more important than today’s policy announcement would be the US inflation data to be released on Friday. If the US inflation print comes higher than expected, markets will start discounting a more aggressive Fed and this can cause a sharp market correction. On the other hand, if the data indicate inflation peaking and potentially drifting down, the US market will bounce back providing a lift up for global markets. One predictable trend in India is that FPIs will continue to sell on every rally,” said
“Indian economy is resilient with strong macroeconomic buffers,” said RBI Governor Das. He added that inflation has increased beyond tolerance levels primarily attributed to supply shocks linked to war. Read GDP growth for the current year has been retained at 7.2%. RBI believes Q1 will see GDP grow at 16.2% while Q2 GDP growth is expected to be at 6.2%, Q3 is seen at 4.1% and Q4 GDP numbers are expected to be at 4%.
Inflation is projected at 6.7% for the current fiscal year. RBI Governor said that Q1 inflation is expected to be at 7.5% while 7.4% in Q2. In Q3 inflation is seen at 6.2% before falling to 5.8% in Q4. 75% of the increase in inflation is attributed to the food group.
Story By- Saayak Karmakar, Resident Editor, Interview Times
Image Source- Google
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