RBI hikes repo rate by half a percent to 5.40%

The Reserve Bank of India raised the key policy rate, the repo rate, by half a percentage in its policy review on Friday. This is the third straight hike by RBI ever since it started hiking interest rates this year. The higher interest rates are likely to keep both the equity and debt markets in a tight range, say analysts.

“On the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) at its meeting today decided to increase the policy repo rate under the liquidity adjustment facility (LAF) by 50 basis points to 5.40 per cent with immediate effect. Consequently, the standing deposit facility (SDF) rate stands adjusted to 5.15 per cent and the marginal standing facility (MSF) rate and the Bank Rate to 5.65 per cent,” the RBI said.

The MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.

These decisions are 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 RBI said.

The next meeting of the MPC is scheduled during September 28-30.

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