Several global storms hitting together prompted the Reserve Bank to hike the key interest rate in an off-cycle review by the Monetary Policy Committee (MPC), said the minutes of the rate-setting panel that were released on Wednesday.
RBI Governor Shaktikanta Das, as per the minutes, said the off-cycle monetary policy actions were aimed at lowering inflation and anchoring inflation expectations with a view to strengthening the medium-term growth prospects of the economy and protecting the purchasing power of the weaker sections of society.
The MPC after its meeting on May 2 and 4 had recommended raising the key interest rate (repo) by 40 basis points. The rate was hiked with immediate effect. It was the first hike since August 2018.
"As several storms hit together, our monetary policy response should be seen as an important step to steady the ship. The Indian as well as global evidence clearly shows that high inflation persistence hurts savings, investment, competitiveness and growth," the governor had said as per the minutes.
RBI Deputy Governor and MPC member Michael Debabrata Patra said at the meeting that in this milieu, a measured approach and a cool head is warranted.
"Recent incoming data suggest that India’s macro-fundamentals, barring imported food and fuel inflation, are still intact and in sync with the recovery that has been tenaciously making its way through waves of the pandemic," he said.
All the six members of the panel had voted to raise the repo rate or short-term lending rate by 40 basis points to 4.4 per cent.