This is the 10th time that the central bank has hiked its key rates since March 2010 in its endeavour to deal with high inflation
The Reserve Bank of India (RBI) in its mid-quarter monetary policy review has hiked the repo (short-term lending) and reverse repo (short-term borrowing) rates by 25 basis points each, in line with market expectations. Following the move, the repo rates stands at 7.50% and the reverse repo rate at 6.50%. This is the 10th time that the central bank has hiked its key rates since March 2010 in its endeavour to curb inflation.
Subsequently, the marginal standing facility (MSF) has also gone up by 25 basis points to 8.5%. However, RBI has kept the cash reserve ratio (CRR) steady at 6%.
The policy initiative, the RBI said: "Is expected to contain inflation and anchor inflationary expectations by reining in demand side pressures."
Headline inflation stood at over 9% in May, much above the central bank's comfort level of 5%-6%.
The measures, the RBI said, would also help in mitigating the impact of "potentially adverse global developments."
The central bank further said it would continue with its anti-inflationary stance to arrest the price rise.
"Based on the current and evolving growth and inflation scenario, the RBI will need to persist with its anti-inflationary stance of monetary policy," it added.
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