RBI hikes interest rate by 35 basis points to 6.25%

The RBI's Committee on Wednesday voted to hike the repo rate by 35 basis points to 6.25 per cent in its bi-monthly rate. Five out of six people decided to hike the rate by 35 basis points. The policy rate is now at the highest level since August 2018. The RBI continued to keep its rate hike stance unchanged at the withdrawal of accommodation Governor Shaktikanta Das announced that the nation's financial system is robust, corporate is healthy as India remains in a 'bright spot in an otherwise gloomy world, yet inflation remains elevated.

In order to contain inflation, the central bank has hiked the basic lending rate by 225bps, from 4 per cent in April to 6.25 per cent in December. India's retail inflation fell from 7.79 per cent to 6.77 per cent in the month of October. The central bank increased the key interest rate by 50 basis points three times in June, August, and September, while the RBI hiked the repo rate by 40 bps in the May MPC meeting.

The GDP growth forecast for October-December 2022 was lowered to 4.4%, while the forecast for January-March 2023 was revised down to 4.2%. RBI Governor Shaktikanta Das said that the GDP growth forecast for FY 23 has been lowered to 6.8% from 7%. The CPI inflation forecast for October-December 2022 was raised to 6.6% from 6.5%, while the January-March 2023 inflation forecast was raised to 5.9% from 5.8%. The CPI inflation forecast for April-June 2023 has been retained at 5.0%, while the inflation forecast for April-June 2023 is seen at 5.4% in July-September 2023. The inflation forecast for FY 23 has been retained at 6.7%.