In a surprise move on Wednesday, 4 May, the Reserve Bank of India hiked the benchmark repo rate for the first time in four years by 40 basis points to 4.4 percent. Alongside this, the central bank also raised the cash reserve ratio or CRR by 50 basis points to 4.50 percent.
Unveiling the new policy on Wednesday, RBI Governor Shaktikanta Das said the bank is aiming to keep inflation – which is already close to 7 percent – at the desired level in the wake of the ongoing Russia-Ukraine war and increase in food and commodity prices globally.
However, there are a few puzzling takeaways from the central bank statement. First, is the fact that the bank has retained the accommodative monetary policy, which essentially means that the bank is prepared to expend the money supply to boost economic growth. This, obviously, runs counter to the bank's latest move.