Reserve Bank of India’s Monetary Policy Committee voted by a majority of four out of six members to increase the policy repo rate by a smaller quantum—25 basis points—from 6.25 per cent to 6.50 per cent to keep inflation expectations anchored and break the core inflation persistence. 

RBI ups repo rate

The committee also voted by a majority of four out of six members to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.

With the latest repo rate hike, the MPC has cumulatively upped the key policy rate by 250 basis points since May 2022.

The latest hike comes in the backdrop of retail inflation cooling down to a 12-month low of 5.72 per cent in December 2022, index of industrial production surging to a five-month high of 7.1 per cent, and the US Fed slowing down the pace of hike in benchmark interest rate to only a quarter percentage point.

RBI Governor Shaktikanta Das noted that the economy is holding up, but weak external demand could prove to be a drag on growth.

While inflation is expected to moderate, it could still remain above 4 per cent in FY24, he said.

For FY24, real GDP growth and retail inflation have been projected at 6.4 per cent and 5.3 per cent, respectively.