RBI hikes repo rate by 25 basis points to 6.5 per cent

The Reserve Bank of India slowed the pace of interestrate increases for the second straight time when it on Wednesday expectedly increased borrowing cost by 25 basis points but hinted more to come as core inflation remained highThe RBIs sixmember Monetary Policy Committee voted 42 to raise the benchmark repurchase or repo rate to 650 per cent and retain its stance of withdrawing accommodation which was adopted early last yearThis is the sixth straight increase in interest rates since May last year and the cumulative hike now totals 250 bpsThe RBI raised interest rates by 35 bps in December 2022 Rates were hiked by 40 bps in May and 50 basis points hike each in June August and SeptemberThe stickiness of core or underlying inflation is a matter of concern We need to see a decisive moderation in inflation We have to remain unwavering in our commitment to bring down CPI headline inflation RBI Governor Shaktikanta Das said while announcing the committees decisionAlso Read RBI asks banks for details of Adani Group exposureAdjusted for inflation the policy rate still trails its prepandemic levels Das said adding liquidity remains in surplusThe consumer price inflation CPI forecast was lowered to 65 per cent for the current fiscal from 67 per centWhile inflation is expected to moderate in 202324 it is likely to rule above the 4 per cent targetThe retail inflation rate eased to 572 per cent in December from 588 per cent in the previous month falling below the RBIs upper tolerance band of 26 per cent for a second straight month though core inflation which excludes more volatile food and fuel prices was still running at 61 per centGoing ahead the food inflation outlook will benefit from a likely bumper rabi harvest led by wheat and oilseeds Das saidThe RBI projected GDP growth of 64 per cent in the fiscal year starting April 1 202324 down from 7 per cent in the current year with Das saying the Indian economy remains resilient in the face of considerable uncertainties on global commodity pricesThe global economic outlook does not look as grim now as it did a few months ago Growth prospects in major economies have improved while inflation is on a descent though still remains well above target in major economies The situation remains fluid and uncertain he said Commodity prices may remain firm with the easing of COVID19 related restrictions in some parts of the worldAmong the measures announced on Wednesday was allowing lending and borrowing of government securities or Gsecs with a view to provide investors with an avenue to deploy their idle securities enhance portfolio returns and facilitate wider participationThis measure will also add depth and liquidity to the Gsec market aid efficient price discovery and work towards a smooth completion of the market borrowing programme of the centre and states Das saidThe RBI also restored market hours for the Government Securities market to the prepandemic timing of 9 am to 5 pmOn the rupee Das said it has remained one of the least volatile currencies among its Asian peers The depreciation and the volatility of the Indian rupee during the current phase of multiple shocks is far lower than during the global financial crisis and the taper tantrumIn a fundamental sense the movements of the rupee reflect the resilience of the Indian economy he saidThe current account deficit CAD which stood at 33 per cent in the first half of 202223 is expected to moderate in the second half and remain eminently manageable and within the parameters of viabilityDas also said draft guidelines for the levy of penal interest on advances will be issued for commentsWith UPI becoming hugely popular for retail digital payments in India the RBI has proposed to permit all inbound travellers to India to use UPI for their merchant payments P2M while they are in the country To begin with this facility will be extended to travellers from G20 countries arriving at select international airports he saidThe RBI will also launch a pilot project on QR Codebased Coin Vending Machines QCVM in 12 citiesThese vending machines will dispense coins against debit to the customers account using UPI instead of physical tendering of banknotes This will enhance the ease of accessibility to coinsThis story has been sourced from a third party syndicated feed agencies Midday accepts no responsibility or liability for its dependability trustworthiness reliability and data of the text Midday managementmiddaycom reserves the sole right to alter delete or remove without notice the content in its absolute discretion for any reason whatsoever