RBI hikes rates, says inflation to be 8%

Mar 18, 2011 |

Age Correspondent

mumbai

There were no surprises from the Reserve Bank, which raised its repo and reverse repo rates by a quarter per cent on Thursday. The repo rate is what banks pay the RBI to borrow from it, while the reverse repo is what the RBI pays banks.

The bad news: the RBI raised its inflation estimate to eight per cent from seven per cent. Higher RBI policy rates could mean higher interest rates on bank deposits and loans. The past three months saw several rate hikes by banks.
Most economists expected this hike and seem resigned to future hikes. The RBI left the cash reserve ratio and SLR rates untouched at 6 per cent and 24 per cent respectively.
While it kept GDP growth projection at 8.6 per cent for FY11, it said there were risks of rising commodity and oil prices hurting the growth momentum.

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