The main aim of the MPC is to keep inflation at 4 per cent. However, the range of 2 to 6 per cent is considered RBI’s tolerance limit.
The consumer price index-based (CPI) inflation – the main yardstick for monetary policymaking – in April declined to an 18-month low of 4.7 per cent year-on-year (YoY) (from 5.7 per cent YoY in March), well within the RBI’s 2-6 per cent target band.
February 10, 2022
“Overall, taking into consideration the outlook for inflation and growth, in particular the comfort provided by the improving inflation outlook, the uncertainties related to Omicron and global spillovers, the MPC was of the view that continued policy support is warranted for a durable and broad-based recovery,” Das said.
The war in Ukraine started in the last week of February. However, the RBI decided to keep the repo rate at 4 per cent. The GDP growth forecast was reduced to 7.2 per cent in FY23. The inflation forecast was hiked to 5.7 per cent. The average crude oil price was taken as $100 per barrel.
Due to high inflationary pressures on the back of the war in Ukraine, the RBI held an off-cycle meeting in May and decided to raise the repo rate by 40 bps to 4.4 per cent. In March, the retail inflation was 7 per cent.
June 8, 2022
The GDP growth forecast was retained at 7.2 per cent. The average crude oil price assumption was changed to $105 per barrel, and the inflation forecast for FY23 was also raised to 6.7 per cent. This was considerably higher than the 5.7 per cent announced in April.
August 5, 2022
The GDP and inflation forecast for FY23 were retained at 7.2 per cent and 6.7 per cent, respectively.
After a brief respite, inflation went back to 7 per cent in August. RBI again raised the repo rate by 50 bps to 5.9 per cent and said it would remain “focused on the withdrawal of accommodation”.
December 7, 2022
“GDP growth in India remains resilient and inflation is expected to moderate, but the battle against inflation is not over. Pressure points from high and sticky core inflation and exposure of food inflation to international factors and weather-related events do remain,” Das said.
Das announced another rate hike of 25 bps, taking the key benchmark to 6.5 per cent. The MPC’s decision was split 4-2. Das also announced that the MPC has decided to focus on the withdrawal of the “accommodative stance” as the “situation does not look so grim now”.
For the first time since May 2022, the RBI MPC decided to pause the rate hikes. Das said that they are not ruling out the chances of a further rate hike but will watch the impact of previous ones before going for another raise.