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In a surprising move ahead of the expected US Fed rate hike, the monetary policy committee (MPC) of the RBI on Wednesday unanimously voted to up the repo rate by 40 basis points to 4.40 per cent even as it continued with the accommodative policy stance while deciding to continue focusing on calibrated withdrawal of liquidity accommodation.
The MPC held an off-cycle meeting between May 2 and 4 to decide on hiking the repo rate amid concerns on the sharp uptick in inflation, which has been ruling over its upper band of 6 per cent since January 2022, even as economic activity is progressing.
Governor Shaktikanta Das said the rate hike should be seen as reversal of the May 22, 2020 repo rate cut from 4.40 per cent to 4 per cent.
Following the hike in repo rate, the standing deposit facility stands increased to 4.15 per cent (from 3.75 per cent) and the marginal standing facility to 4.65 per cent (from 4.25 per cent). The cash reserve ratio has also been hiked by 50 basis points from 4 per cent to 4.50 per cent.
The Government Securities (G-Sec) market reacted negatively to the rate hike. Price of the 10-year benchmark G-Sec crashed about ₹1.90 intraday, with its yield shooting up by 28 basis points.
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