India Business

RBI Hikes Interest Rate By 0.25% On Inflationary Concerns

Written By Press Trust Of India | Mumbai | Published:

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  • Reserve Bank of India for the second time in two-month raised interest rate by 0.25 per cent on inflationary concerns
  • The central bank in its third bi-monthly policy of the current fiscal raised benchmark repo, or the short-term rate at which it lends to other banks, by 0.25 per cent to 6.5 per cent

Reserve Bank of India for the second time in two-month raised interest rate by 0.25 per cent on inflationary concerns.

The central bank in its third bi-monthly policy of the current fiscal raised benchmark repo, or the short-term rate at which it lends to other banks, by 0.25 per cent to 6.5 per cent.

The 6-member Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel kept its stance at neutral.

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For July-September, it pegged CPI-based retail inflation at 4.2 per cent which it saw firming up to 4.8 per cent in the second half of the current fiscal.

The projected inflation rate is above its targeted comfort level of 4 per cent.

RBI kept the GDP forecast for the current fiscal unchanged at 7.4 per cent and saw it at 7.5-7.6 per cent in the second half of the current fiscal.

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The 6-member Monetary Policy Committee (MPC), headed by RBI Governor Urjit Patel, started three-day deliberations in Mumbai on July 30 to decide on the key interest rate amid elevated oil prices and inflation hovering around 5 percent.

Experts were divided in their opinion about the likely action of Reserve Bank of India on the benchmark lending rate. While some said the central bank will maintain status quo on August 1, others did not rule out another rate hike.

The MPC  met for the third bi-monthly Monetary Policy Statement for 2018-19. 

Experts also opined that the government's decision to substantially hike the minimum support price for Kharif crop will have adverse impact on inflation.

While crude oil prices have come off the three year high, they continue to be volatile threatening inflation and current account deficit.

According to the research report, India's largest bank SBI said that the RBI may not go for another round of rate hike at this juncture.

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