RBI hikes repo rate to 4.0% in a surprise move, EMIs likely to go up - Hindustan Times
close_game
close_game

RBI hikes repo rate to 4.0% in a surprise move, EMIs likely to go up

By, New Delhi
May 04, 2022 03:10 PM IST

RBI governor Shaktikanta Das said all six members of the Monetary Policy Committee (MPC) unanimously voted for a rate hike while maintaining the accommodative stance.

Reserve Bank of India (RBI) governor Shaktikanta Das on Wednesday announced that Monetary Policy Committee (MPC), in an unscheduled policy review with a view to contain inflation, voted unanimously to increase the policy repo rate by 40 basis points (bps) to 4.40 per cent with immediate effect. 

RBI governor Shaktikanta Das. (PTI PHOTO)
RBI governor Shaktikanta Das. (PTI PHOTO)

All six members of the MPC unanimously voted for a rate hike while maintaining the accommodative stance, Das said.

Hindustan Times - your fastest source for breaking news! Read now.

MPC also raised the amount of deposits banks are required to maintain a cash reserve by 50 bps to 4.5 per cent to suck out 87,000 crore of liquidity from the banking system. The CRR hike will be effective from May 21.

While the inflation has remained above the targetted 6 per cent since January, Das said the inflation print in April is also likely to be high. The retail inflation print for March stood at 6.9 per cent. The RBI has done the first rate hike since August 2018.

The governor said the decision of MPC reversed the May 2020 interest rate cut by an equal amount.

“Shortages and volatility in commodities and financial markets are becoming more acute,” Das said in an online briefing, adding that there is a risk price stay at this level for “too long” and expectations become unanchored. The bank’s next scheduled rate decision isn’t until June 8, reported Bloomberg.

The government has intensified the battle against inflation that’s outpaced its expectations for much of the year. In its first unscheduled rate change since the depths of the pandemic, the RBI increased its repurchase rate to 4.40 per cent, from the record low 4 per cent its been held at for the past two years to support the economy.

Also Read | HDFC raises lending rate by 5 basis points; EMI to rise for existing borrower

RBI policymakers have begun signalling recently that higher rates were in the works as consumer prices breached the upper limit of the bank’s target through the first quarter of 2022, Bloomberg added.

Increases in fuel and food prices, exacerbated by Russia’s invasion of Ukraine and sustained pandemic-related supply chain disruptions, have run hotter than the RBI had expected for much of this year. Headline inflation in March rose to a 17-month high of 6.95 per cent, riding above the RBI’s 2 per cent-6 per cent target range for a third month.

The RBI in April raised its inflation forecast to 5.7 per cent for the fiscal year that started April 1, up from its 4.5 per cent in February, and said it sees gross domestic product growth during the year at 7.2 per cent, compared with a previous expectation of 7.8 per cent.

 

Unlock a world of Benefits with HT! From insightful newsletters to real-time news alerts and a personalized news feed – it's all here, just a click away!- Login Now!
Stay informed on Business News along with Gold Rates Today, India News and other related updates on Hindustan Times Website and APPs
SHARE THIS ARTICLE ON
Share this article
  • ABOUT THE AUTHOR
    author-default-90x90

    Follow the latest breaking news and developments from India and around the world with Hindustan Times' newsdesk. From politics and policies to the economy and the environment, from local issues to national events and global affairs, we've got you covered.

SHARE
Story Saved
Live Score
OPEN APP
Saved Articles
Following
My Reads
Sign out
New Delhi 0C
Friday, March 29, 2024
Start 14 Days Free Trial Subscribe Now
Follow Us On