Loans and mortgages will get more expensive with the Reserve Bank of India’s Monetary Policy Committee (MPC) announcing a fifth consecutive interest rate hike on Wednesday, of 0.35 percentage points, taking the policy rate to 6.25%, the highest since March 2019.
RBI has taken up the policy rate by 2.25 percentage points since May, and the tone and tenor of its statement, as also the vote break-up – one of the six members of MPC voted against a rate hike; and two voted against the continued focus on “withdrawal of accommodation to ensure that inflation remains within the target...” – suggest that there could be another rate increase in February.
The monetary policy committee (MPC), which is made up of three members from the RBI and three outside members, hiked the key lending rate, also known as the repo rate, by 0.35 per cent to 6.25 per cent with a five out of six majority.
The standing deposit facility rate and the marginal standing facility rate were also increased by the same quantum to 6.00 per cent and 6.50 per cent, respectively.
The RBI cited slowing price pressures for the smaller rate hike after consumer-price-based inflation eased to a three-month low of 6.77 per cent in October from a year ago.
On growth, even though the MPC has made a downward revision to its 2022-23 GDP forecast – it now stands at 6.8% compared to 7% in the September resolution – Governor Shaktikanta Das reiterated that “even after this revision in our growth projection for 2022-23, India will still be among the fastest growing major economies in the world”. It expects the economy to expand by 4.4% this quarter and 4.2% next quarter, down from the 4.6% each it had previously projected for them.
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