India’s policy rate climbs to 4.9% p.a. as Monetary Policy Committee hikes rate

The decision comes on the back of a multi-decadal high global inflation
The decision comes on the back of a multi-decadal high global inflation
The decision comes on the back of a multi-decadal high global inflation

The monetary policy committee increased the policy rate or repo rate by 50bps in its June 2022 monetary policy meeting, to 4.9% p.a., following an increase of 40bps in an off-cycle policy announcement in May. The decision comes on the back of a multi-decadal high global inflation, and India’s own inflation at 7.8% in April, which is now 180bps above the target of 6%. Adverse global supply conditions continue to keep the prices of commodities elevated, especially crude oil, which has eased but still remains substantially high.

The decision comes on the back of a multi-decadal high global inflation

On the bright side, a good monsoon forecast augurs well for India’s Kharif production, which could aid in mitigating the upward movement of headline inflation. Overall, the MPC expects inflation to remain above the upper target of 6% until the end of this calendar year. The outlook for growth, on the other hand, remains positive, on the back of steady vaccinations and improvement of domestic consumption in both rural and urban regions. Furthermore, the forecast of normal monsoons bodes well for rural consumption, and an uptick in contact-intensive services will help revive urban consumption. 

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Further data and analysis on India’s economy are available on the CEIC India Economy in a Snapshot – Q2 2022 report.

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8th June 2022 India’s policy rate climbs to 4.9% p.a. as Monetary Policy Committee hikes rate