Get ready to pay more for your loan EMIs. The Reserve Bank of India has hiked the key repo rate by 0.25% to 6.5%. This is the 6th rate hike by the central bank since May 2022. The RBI governor said that the impact of the rate hikes are still working their way through the system. Here are the key highlights of the governor’s speech.
INDIAN ECONOMIC OUTLOOK
The Indian economy remains resilient. Sustained urban and rural demand, govt’s thrust on capital expenditure among other things should sustain economic activity. In fact, several high frequency indicators point towards strengthening of activity. However, a weak external demand and uncertain global scenario could be a drag on India’s growth. GDP growth for 2023-24 has been projected at 6.4%.
ON INFLATION
The governor pointed out that core inflation is sticky and that remains a matter of concern. The RBI will remain unwavering in the commitment to bring down inflation. Inflation is projected at 6.5% for 2022-23 and at 5.3% for 2023-24. From the governor’s comments, it’s clear that another rate hike has not been ruled out. The RBI will “weigh all incoming data and forecasts to determine appropriate action and policy state going forward”.
ON THE RUPEE
The RBI governor highlighted that the Indian rupee was one of the least volatile currencies among other Asian currencies. He also pointed out that the depreciation and volatility of the Rupee is much lower than during the global financial crisis.
GLOBAL OUTLOOK
On the global scenario, the RBI governor said that things do not look as grim as they did a few months ago, however a high degree of uncertainty remains. Inflation, although has eased, still remains above the target in major economies.