RBI's big announcement: repo rate hike by 40 basis points, home loans will become more expensive

Reserve Bank of India Governor Shaktikans Das held a surprise press conference on Wednesday and announced an increase in the benchmark rate. The RBI Monetary Policy Committee has hiked the repo rate by 40 basis points, or 0.4 per cent. That means the repo rate is now 0.4 percent. Governor Shaktikant Das said the effects of the Russia-Ukraine war were being felt and the impact of the war was being felt by the International Monetary Fund. In view of the growing demand, the RBI is raising its benchmark rate by abandoning its accommodative stance.

For the last two years, the RBI has maintained its liberal policy. The policy rate was maintained in the previous 11 meetings of the Monetary Policy held till April 2022. At its earlier meeting earlier this month, the MPC had kept the repo rate unchanged at 4 per cent and the reverse repo rate at 3.35 per cent.

Inflation is out of control due to these factors
Addressing the media after the MPC meeting, the RBI said that retail inflation rose sharply to 7 per cent in March 2022. Headline CPI inflation, especially retail inflation, has risen sharply, mainly due to rising food prices. Apart from this, geopolitical tension has also increased inflation. The war between Russia and Ukraine, which has been raging for months, has pushed up prices of many grains, including wheat. This tension has had a detrimental effect on the global supply chain.