RBI hikes repo rate by 26 bps to 6.50%

Mumbai, Aug 1 (KNN) The Reserve Bank of India's (RBI's) Monetary Policy Committee (MPC), headed by governor Urjit Patel, today hiked the policy repo rate by 25 basis points (bps) to 6.50 per cent in its third bi-monthly policy meet.

In a statement, MPC said, “On the basis of an assessment of the current and evolving macroeconomic situation at its meeting today, the Monetary Policy Committee (MPC) decided to increase the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 6.5 per cent.”

Consequently, the reverse repo rate under the LAF stands adjusted to 6.25 per cent, and the marginal standing facility (MSF) rate and the Bank 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 (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth, the statement added.

It may be noted that the central bank raised repo rate by 25 bps to 6.25 per cent in June, marking the first hike by the MPC in the last four years.

RBI in its policy statement has said that the risks to its 4 per cent inflation outlook has increased since its last meeting in June on account of rising trade tensions. 

In its assessment, RBI said, “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.”