The Reserve Bank of India on Wednesday hiked benchmark lending rates by 50 basis points in its bid to tame the surging inflation, governor Shaktikanta Das announced as the Monetary Policy Committee (MPC), which started its deliberations on Monday, concluded its review.
RBI raised the repo rate, or the rate at which the central bank lends short-term cash to other banks, by 50 basis points to 4.90 per cent from 4.40 per cent.
The Consumer Price Index (CPI) based inflation, which RBI factors in while arriving at its monetary policy, is on the rise since October 2021. Retail inflation has remained above RBI's upper tolerance level of 6 per cent since January.
It had soared to an 8-year high of 7.79 per cent in April. The government has tasked the central bank to ensure retail inflation remains at 4 per cent with a margin of 2 per cent on either side.
Last month, in an off-cycle review MPC raised the key policy rate (repo) by 40 basis points to 4.4 per cent in a bid to curb soaring prices and inflation. It was the first rate hike after August 2018.
With an aim to cushion the impact of lockdown, RBI had slashed the repo rate by 75 basis points to 4.40 per cent in March 27, 2020 from 5.15 per cent.
On May 22, 2020, RBI again cut the repo rate by 40 basis points and brought it down to 4 per cent. Thereafter, it maintained status-quo in the benchmark interest rate for almost two years before increasing it on May 4, 2022.
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