8 Dec 2022
The Reserve Bank of India, in its monetary policy meeting on December 7, 2022, has raised the repo rate by another 35 basis points, and the rate is 6.25% with immediate effect*.
Key things to know
- The monetary policy committee has raised the repo rate for the fifth time in a row. Repo rate has been raised by a total of 225 basis points since April 2022, when the rate hike cycle began.
- The central bank will focus on the withdrawal of accommodation to ensure that inflation remains in its target of 4% for the medium term, within a band of +/- 2%, while supporting growth.
- The Indian central bank has further lowered the FY23 GDP forecast to 6.8% from 7%. It had revised the forecast in its previous meet as well, bringing it down from 7.2% earlier.
- It has, though, maintained the inflation target for FY23 at 6.7%.
Central bank view
“On balance, the MPC is of the view that further calibrated monetary policy action is warranted to keep inflation expectations anchored, break the core inflation persistence and contain second-round effects, so as to strengthen medium-term growth prospects,” it said in its statement.
Kotak Mahindra Mutual Fund’s views?
The RBI may hike repo rate by around 25 basis points in February 2023, considering that the current repo rate is 100 bps above the RBI’s inflation estimate of 5.2% for H1 of FY24.
What can investors do?
Investors may consider increasing the duration of their investment portfolio.
*Source: rbi.org.in, The details and the views expressed here are as on December 7, 2022
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