The Reserve Bank of India today raised its Repo rate by 50 basis points to 4.90 percent. This is the second hike in the last five weeks. The last hike was announced in an unscheduled meeting on May 4th where the repo rate was raised by 40 basis points.
RBI Governor, Shaktikanta Das, stated that the rates have been increased primarily to tame the rising inflation, which has been caused by elevated commodity prices due to the war in Ukraine. For consumers, this will cause a further increase in deposit rates and EMIs.
Here are the key takeaways from today’s meeting:
Savart trivia: What is Repo Rate?
The Repo rate is the key policy rate at which the RBI lends short-term funds to banks.
RBI is likely to increase the interest rates in the coming meetings as inflation is expected to remain high and growth is expected to slow down as a result – causing near-term challenges for the market.
RBI revised the inflation estimates for FY23 (current year) from 5.7% to 6.7%. This is higher than the current RBI’s upper threshold of the target range, i.e., 6%.
The GDP (Gross Domestic Product) growth rate estimate has been retained by RBI at 7.2% for FY23 compared to 8.7% in FY22. GDP growth rate is expectedly lower due to inflation impacting the consumption (private final consumption expenditure contributes more than 55% to the overall GDP).
Individual investors engage in stock market activity for a variety of reasons, e.g., long-term gains, short-term gratification, experiencing daily highs/lows, learning, applying intellectual strategies, etc. Their approaches to achieving these objectives can be broadly classified as active or passive in terms of the time spent analyzing the markets and their frequency of transactions. Let’s understand […]
7 Common Investing Mistakes That Can Reduce Your Returns from the Market Investing is an exciting experience. But it can also overwhelm people, especially those who are starting afresh. By their very nature, stock markets go up and down – disciplined investors understand this, and develop strategies to reduce their risks during market lows (as […]
The Tap Is Being Turned Off Understanding the impact of higher interest rates and lower liquidity on stock market prices Over the last few days, the Indian rupee has hit a lifetime low of 78.20 against the US dollar while oil prices remained at their elevated levels. Additionally, the US reported a 40-year high inflation […]