Reserve Bank of India Announces Hike of Repo Rate

Retail inflation is expected to average out at 5.7% for the fourth quarter and is projected at 6.5% for the entire year.

MUMBAI: Shaktikanta Das, the Governor of the Reserve Bank of India has announced a hike in the repo rate by 25 basis points Wednesday.

The latest hike is the first one of the year taking the key benchmark interest rate to 6.5 %. The Governor also mentioned this decision has been taken to change from the "accommodative stance" and that the "situation does not look so grim now".

Shaktikanta Das also mentioned that the Indian economy is very strong and was able to remain resilient even during the volatile nature of economies across the world. He also mentioned current economic environment and the weak global demand will hamper domestic growth.

He also mentioned that the National Statistical Office has marked the real growth in GDP at 7% for the financial year 2022-23 while adding that the expected rate for the year 2023-24 stands at 6.4%. The Economic Survey of the year presented by the finance ministry project a growth between 6 % and 6.8% for the Financial Year 2023-24.

The Governor also mentioned that the world economy is now improving with the inflation rates coming down. Retail inflation is expected to average out at 5.7% for the fourth quarter and is projected at 6.5% for the entire year. For the financial year 2024, the inflation rate is predicted to be 5.3%. He added that the inflation rate is expected to come down in the coming fiscal, it will remain around 4%. RBI is mandated to keep inflation at 4 per cent with a margin of 2 per cent on either side.

He also mentioned the timings of the government securities market have been restored to the pre-pandemic level of 9 AM to 5 PM and RBI will now allow lending and borrowing of G-secs.

A hike in repo rate is usually followed by an increase in deposit and loan interest rates, and vice-versa.

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