“A REVIEW OF RECENT UPWARD REVISION IN REPO RATES BY THE RESERVE BANK OF INDIA”

Abstract

In February 2023 the Reserve Bank of India (RBI) increased the repo rate by 25 basis points to 6.5 percent. This was the sixth consecutive rise in the repo rates by the RBI since May 2022. According to experts, the latest repo rate revision could be the final hike in the current RBI tightening cycle, after which there may be a pause. The global economic outlook is not as gloomy as it was a few months ago. Inflation in major economies remains well above target. The situation remains fluid and uncertain. India's economy remains resilient, with real GDP growth estimated at 7 percent in 2022-23. Several central banks have reduced the pace of rate hikes or put them on hold. However, core inflation remains inelastic. Inflation in India is likely to hover above the 4 percent target. Additional monetary policy measures are also warranted in India. The RBI expects retail inflation to average 6.5 percent in the current fiscal and moderate to 5.3 percent in 2023-24. This paper goes into the details of the increase in the repo rates by a Central Bank and tries to explain the current increase.

Keywords: REPO rate, RBI, Inflation, Retail inflation