Informist, Monday, May 2, 2022

MUMBAI – In a move that caught markets and central bank watchers off guard, the Monetary Policy Committee after an off-cycle meeting today unanimously hiked the repo rate by 40 basis points to 4.40%, while voting to continue with an accommodative stance with focus on withdrawal of COVID-19 linked accommodation.

"The MPC also decided unanimously to remain accommodative while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth," Reserve Bank of India Governor Shaktikanta Das said in a video address today,

Das also announced that in line with the tightening in policy rates, the cash reserve ratio was also being hiked by 50 basis points to 4.50% of net, demand and time liabilities, effective from the fortnight starting May 21.

The measure is expected to withdraw 870 bln rupees of liquidity from the system, which is in line with the April policy commitment to withdraw excess liquidity provided to the system as part of measures to tackle COVID-19 over a multi-year timeframe.

With the rise in the repo rate, the standing deposit facility also adjusts higher by 40 basis points to 4.15%, and the marginal standing facility and bank rate rise to 4.65%.  More