Bhubaneswar: The Reserve Bank of India (RBI) on Friday increased the repo rate by 50 basis points (BPS) as a step to arrest high inflation rate. With the latest rate hike, which has been effected for 4th time in a row, the repo rate now stands at 5.9%.
Announcing the policy decision, RBI Governor Shaktikanta Das said monetary policy committee (MPC), comprising three members from the RBI and three external members, raised the key lending rate or the repo rate by 50 BPS to 5.90% with five out of the six voting in favour of the hike. With this, the central bank has raised the rates by a total 190 basis points since May.
Stating that the rate-setting panel was worried about inflation, Das said the RBI is watching the price situation closely. “There are upside risks to food prices and lower sowing has upped price pressures. These risks to food inflation will have adverse impact on inflation expectations,” he added.
Without giving any forward guidance on policy rates, he said the policy decisions going ahead will be calibrated to the incoming data.
He further said inflation projection is retained at 6.7% for the current year and it is likely to fall to 5% by first quarter of next fiscal year. In the second half of this fiscal year, inflation is likely to remain at 6%, he added.
Das said the MPC is of the view that persistently high inflation necessitates ‘a calibrated withdrawal’, which means that further rate hikes are not ruled out.
Repo is the rate at which the central bank lends short-term funds to banks. One BPS is one-hundredth of a percentage point.
