RBI monetary policy signals change in stance for June 2022

Next RBI monetary policy stance likely to be followed by shallow rate hike cycle, with the repo rate being increased by 25 bps each in August and September 2022.

The first monetary policy review meeting for FY2023 was rather eventful, coming in the backdrop of an easing of the pandemic and a flaring up of geopolitical tensions. The Monetary Policy Committee (MPC) maintained status quo on the repo rate and kept the stance accommodative, in line with our expectations. However, it normalised the width of the liquidity adjustment facility (LAF) corridor to pre-pandemic levels by introducing the Standing Deposit Facility (SDF) at 3.75% as the floor rate, in place of the fixed rate reverse repo (FRRR), which was kept unchanged at 3.35 per cent. This move would enable the