RBI Governor Live: MPC Hikes Repo Rate By 40 Basis Points, CRR Hiked By 50 Basis Points
MPC Hikes Repo Rate By 40 Basis Points. Watch RBI Governor Shaktikanta Das Statement Below:
'Proactive & Flexible'
Concluding his comments, RBI governor Das said that the central bank would remain proactive and flexible in light of fast changing global and local domestic environment.
Quoting Mahatma Gandhi, Das said: "I have had my share of disappointments, darkness, but my faith has conquered every one of my difficulties."
Bond Yields Spike To 7.42%
The surprise announcement of significant monetary policy tightening from the RBI has pushed up bond yields. The monetary policy tightening has come in the form of a 40 basis point hike in the repo rate to 4.4%. Alongside the cash reserve ratio has been hiked by 50 basis points to 4.5%.
The 10-year yield has surged to 7.42% from near 7.20% before the announcement.
Cash Reserve Ratio Hiked By 50 Basis Points
In keeping with the stance of withdrawal of accommodation, the RBI has decided to hike the CRR by 50 basis points to 4.5%. This will withdraw about Rs 87,000 crore from the banking system.
The average surplus liquidity in the banking system was at over Rs 7 lakh crore in April, Governor Das said. This had led to the weighted average call rate dipping below the standing deposit facility rate, he said.
Even with the CRR hike, the RBI will ensure adequate liquidity for productive needs of the economy.
The Inflation Outlook
The RBI governor explained the inflation outlook as follows:
Global food price increased have filtered through into India.
High frequency indicators suggest that food prices will remain high.
Prices of edible oils may firm up further.
Elevated feed costs are translating into elevated poultry and dairy product.
Global oil prices holding above $100 per barrel and are feeding into local fuel prices.
The strengthening of inflationary pressures, together with global price shocks, put upward pressure on inflation forecasts.
In these conditions, it is important for monetary policy to focus on withdrawal of accommodation.
Inflation Outlook Needs Resolute Response
Inflation outlook needs resolute and timely response to ensure that long-term inflation expectations are anchored.
An MPC action at this juncture will help ensure macroeconomic stability. It also decided to remain accommodative while focusing on withdrawal of accommodation.