RBI Raises Repo Rate by 25 Basis Points


THE Reserve Bank of India (RBI) has raised its key lending rate or the repo rate by 25 basis points, its second successive increase in 5 years, due to concerns over inflation.

RBI’s monetary policy committee (MPC) increased the policy repo rate, its second since June, to 6.5 per cent, the reverse repo rate adjusted to 6.25 per cent, and the marginal standing facility rate to 6.75 per cent.

“The decision of the MPC is consistent with the neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth,” the RBI said in a statement.

RBI had raised the repo rate for the first time in 4 years in June, the first change since the last cut in August 2017.

Global trade tensions, rising global oil prices, and a weak rupee have led to inflation worries.

“Since the last meeting of the MPC in June 2018, global economic activity has continued to maintain steam; however, global growth has become uneven and risks to the outlook have increased with rising trade tensions,” the central bank said in a statement.

India’s consumer inflation hit 5 per cent in June, higher than RBI’s target of 4 per cent for the eighth straight month.

RBI also raised a flag over the impact of global developments on India, especially with tariff wars and trade protectionism.

“Rising trade protectionism poses a grave risk to near-term and long-term global growth prospects by adversely impacting investment, disrupting global supply chains and hampering productivity. Geopolitical tensions and elevated oil prices continue to be the other sources of risk to global growth,” the statement said.

The central bank has also retained the GDP growth forecast for 2018-19 at 7.4 per cent as in the June policy statement.


RBI Deputy Governor Viral Acharya


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