Highlights of RBI Governor Das’ address post MPC meet

By Vivek Sharma on June 8, 2022 • ( Leave a comment )

KEY TAKEAWAYS

Repo rate hiked by 50 bps
MPC voted unanimously to hike repo rate by 50 bps
SDF rate adjusts to 4.65%, MSF at 5.15%
MPC unanimously decided to focus on withdrawal of accommodation
Repo rate still remains at pre-pandemic level
Necessary to be sensitive to new realities
Our steps will be measured
Will remain proactive in mitigating geopolitical risks

OVERSEAS FACTORS

Facing new challenges due to war in Europe
War has led to globalisation of inflation
Europe war to keep commodity prices elevated
Global stagflation concerns are growing
Emerging markets seeing depreciation of their currencies
Europe war dampening trade globally

INFLATION

Latest survey shows significant fall in inflation expectations
FY23 CPI inflation seen at 6.7%
Upside risks to inflation persist
Cut in VAT on petrol, diesel can lower inflation expectation
75% rise in inflation expectations can be attributed to food
Apr-Jun CPI inflation seen at 7.5%
Jan-Mar CPI inflation seen at 5.8%
Jul-Sep CPI inflation seen at 7.4%
New inflation projection assumes a normal monsoon
Oct-Dec CPI inflation seen at 6.2%
Inflation has increased steeply beyond tolerance levels
Europe war causing food, fuel prices to stay elevated
Will remain focussed on bringing inflation closer to target
MPC noted inflation to remain above 6% till Oct-Dec
Upside risks to inflation in May materialised earlier
Fuel excise cut, other steps by government to help ease inflation
Further monetary policy measures needed to anchor inflation
Inflationary pressure remains broad-based led by supply shocks
MPC felt higher inflation could trigger inflation expectations
Inflationary pressures driven by supply shocks

ECONOMY

Indian economy has remained resilient
Recovery gained momentum despite war, pandemic
Domestic activity picking up despite inflation pressure
Recovery in domestic economic activity remains firm
Available information shows domestic economic recovery firm
PMI for May points towards economic recovery
Urban demand recovering, rural demand gradually improving

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