RBI hikes repo rate, lowers GDP growth projection

Making it the 5th tiime in a row, the RBI’s Monetary Policy Committee on Wednesday raised the repo rate by 35 basis points (bps) to 6.25 per cent with immediate effect, making loans expensive. The policy rate is now at the highest level since August 2018. The RBI has maintained policy stance at ‘withdrawal of accommodation’.

The RBI lowered FY23 GDP growth forecast to 6.8 per cent from 7 per cent earlier. The central bank has, however, retained its retail inflation projection for FY23 at 6.7 per cent.

This is the fifth consecutive repo rate hike this year. With this latest hike, the RBI’s rate-setting panel has raised the key policy rate by 225 basis points this year in total, in order to control inflation. The repo rate is the interest rate at which the RBI lends to the commercial bank.