The RBI raised the repo rate by 50 bps to 5.9%, continuing with the front-loading of rate hikes to contain inflationary pressures. The central bank kept its FY23 inflation projection unchanged at 6.7% YoY and cut the economic growth forecast by 20bps to 7% YoY. With the domestic economic growth holding up despite the global headwinds and persistently high inflation reflected in the unchanged inflation projection, the MPC maintained its policy stance of “focused on withdrawal of accommodation”, indicating further policy tightening ahead. This coupled with aggressive policy tightening by major central banks; we now see the terminal repo rate at 6.5% compared to 6.0% previously in the current tightening cycle.
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