- The Monetary Policy Committee (MPC) of RBI in its meeting on 8th June decided to Increase the policy repo rate under the liquidity adjustment facility (LAF) by 50 basis points to 4.90 per cent.
- Consequently, the standing deposit facility (SDF) rate stands adjusted to 4.65 per cent and the marginal standing facility (MSF) rate and the Bank Rate to 5.15 per cent.
- This is the second consecutive increase by RBI after repo rate was increased by 40 bps last month.
- MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward (4% ± 2%), while supporting growth.
- India’s retail inflation fell slightly to 7.04% in May from an eight-year high of 7.8% in April, helped by a supportive base effect.
- MPC said that the tense global geopolitical situation, the consequent elevated commodity and food prices and global growth risks indicate that the inflation is likely to remain above the upper tolerance level of 6 per cent through the first three quarters of 2022-23. Hence, there is a need for calibrated monetary policy action to keep inflation expectations anchored and restrain the broadening of price pressures.
- PSU and Private Banks have increased their lending rates and deposit rates in response to RBI rate hikes. Banks have revised their Marginal cost of fund based lending rates (MCLR rates) which directly revise the Rate of interest of floating rate loans that they provide.
Impact of Russia-Ukraine War:
- Russia-Ukraine war marked 100 days and fighting has escalated in at least eight regions of Eastern Ukrain including Kyivska, Donetsk, Luhansk and the capital city of Kyiv. As per Ukraine, Russia now holds around 20% of the Ukrain territory.
- UN estimates that 12 million people inside Ukraine will need relief and protection, while more than 4 million Ukrainian refugees may need protection and assistance in neighbouring countries in the coming months.
- Amin Awad, UN Crisis Coordinator for Ukraine said “This war has and will have no winner. Rather, we have witnessed for 100 days what is lost: lives, homes, jobs and prospects.”
- Crude Oil prices are rising with Brent Oil has crossed $110 as global demand is likely to breach pre pandemic levels in 2023 while the supply of oil is struggling due to sanctions on Russia. Russia is world’s third largest crude oil producer and second largest exporter.
- Prices of Wheat have jumped to highest since 2008 in International market as Russia and Ukrain supply quarter of world’s wheat exports and production is likely to be lower in this year due to war. There is a strain on African countries as at least 25 African countries import a third of their wheat from Russia and Ukraine. India has announced an export ban on wheat due to rising prices.
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