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RBI Policy: How has inflation fared since the last monetary policy meeting?

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The Reserve Bank of India (RBI) will hold its Monetary Policy Committee (MPC) meeting from August 3 to 5. The policy decisions will most likely be announced on Friday, August 5, by the RBI governor, Shaktikanta Das.

According to experts, as quoted in a Business Standard report, the RBI might hike the repo rate by 35-50 basis points. This will be done to control the inflation, which has stayed above RBI’s upper tolerance limit of 6 per cent for six months now.

Also, inflation has stayed over 7 per cent for three months. In June, the consumer price index (CPI)-based inflation was recorded at 7.01 per cent.

Nevertheless, inflation has eased since the RBI started to hike the repo rate in May. On May 4, the RBI hiked the key interest rate by 40 basis points in a surprise announcement.

The repo rate hike helped in cooling down the inflation numbers. Before the policy announcement, the CPI inflation for April stood at 7.79 per cent. The inflation for May cooled down marginally to 7.04 per cent.

On June 8, the RBI raised the repo rate further by 50 basis points. The cash reserve ratio (CRR) was also hiked to 4.5 per cent from 4 per cent earlier. As a result, several banks increased the interest rates on saving accounts and fixed deposits (FDs).

The inflation further decreased to 7.01 per cent in June.

But as the war in Ukraine entered the 6th month, the oil prices and prices of other commodities continued to remain inflated. On August 1, Brent crude oil was trading at $102.9 per barrel.

The US Federal Reserve (Fed) has continued to take a hawkish stance. In the policy announcement on July 28, Fed chief Jerome Powell hiked the interest rate by 75 basis points. The RBI is also expected to take a similar stance, but the raise may not be that steep.

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