Duel with inflation continues, RBI hikes rate again
Continuing its hawkish monetary stance to curb high inflation, the Reserve Bank of India (RBI) on Thursday hiked short-term lending rates by 25 basis points, the tenth time it has raised interest rates since March 2010.
The repo rate was raised by 25 basis points from 7.25 per cent to 7.5 per cent with immediate effect.
“The challenge of containing inflation and anchoring inflation expectations persists,” said the RBI in the mid-quarter monetary policy review.
As per the structural changes announced in the monetary policy for 2011-12, the reverse repo rate stands automatically revised to 6.5 per cent.
“While the Reserve Bank needs to continue with its anti-inflationary stance, the extent of policy action needs to balance the adverse movements in inflation with recent global developments and their likely impact on the domestic growth trajectory,” the RBI added.
Latest data showed that annual inflation rose to 9.06 per cent in May, compared to 8.66 per cent in the previous month.
Other policy rates such as the statutory liquidity ratio and the cash reserve ratio — the minimum quantum of money against deposits which the banks have to retain as cash or specified government securities — have been left untouched.
The bank rate also remains unchanged at 6 per cent.
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