RBI raises key rates by 25 bps; auto, home loans to cost more

Sep 16, 2011 |

mumbai

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Concerned over high inflation, the Reserve Bank on Friday raised key interest rates by 25 basis points, its 12th such hike since March, 2010, making auto, home and other loans more expensive.

Following the increase, the short-term lending (repo) rate stands at 8.25 per cent and the short-term borrowing rate (reverse repo) is 7.25 per cent.

The RBI, while announcing its mid-term review of the monetary policy, kept all other rates and ratios unchanged.

"The monetary tightening effected so far by the Reserve Bank has helped in containing inflation and anchoring inflationary expectations, though both remain at levels beyond the Reserve Bank's comfort zone," the central bank said.

Despite the RBI increasing key rates several times since March, 2010, inflation shot up from 9.2 per cent in July to 9.8 per cent in August this year.

Going forward, the RBI said the monetary stance will be "influenced by signs of downward movement in the inflation trajectory."

GDP growth during the first quarter (April-June) of the 2011-12 financial year moderated to an 18-month low of 7.7 per cent from 8.8 per cent in the corresponding period year ago, following a slowdown in industrial output growth during July to 3.3 per cent, the lowest in 21 months.

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