The Reserve Bank of India (RBI) on Wednesday raised its key repo rate, or the key lending rate, by a smaller 35 basis points to 6.25%, to curb lingering inflation pressures.
“Our financial system remains robust and stable, and corporates are healthier than before. India is widely seen as a bright spot in an otherwise gloomy world,” said RBI Governor Shaktikanta Das in his policy statement.
RBI has lowered its GDP growth forecast for FY23 to 6.8% from 7% earlier, Das announced.
Retail inflation slowed to 6.77% in October having stayed above the upper end of the RBI’s 2-6% tolerance band all year, down from 7.41% in September and 7% in August.
The smaller rate hike by RBI’s Monetary Policy Committee (MPC) coincides with expectations that the US Federal Reserve will shift to smaller rate rises at its policy meeting later this month. Monetary Policy Committee had maintained its policy stance at ‘withdrawal of accommodation’, said Das.
Inflation is expected to remain above the 4% midpoint of the RBI’s target for the next12 months, said Das.
The RBI also has to consider the potential pressure on the rupee if it falls behind expected increases in US rates.
India’s gross domestic product (GDP) growth for July-September was reported at 6.3%, matching the RBI’s own forecasts.
