RBI Hikes Repo Rate By 50 Basis Points To 5.4%

With the latest hike, the repo rate or the short term lending rate at which banks borrow has crossed the pre-pandemic level of 5.15 per cent
RBI Hikes Repo Rate By 50 Basis Points To 5.4%

The Reserve Bank of India (RBI) on Friday raised the key repo rate by 50 basis points to 5.40 per cent in order to tame inflation.

With this development, the benchmark lending rate has crossed the pre-pandemic level of 5.15 per cent. 

Notably the RBI MPC raised the key repo rates by 40 basis points and 50 basis points in May and June this year, respectively. Meanwhile, the experts were anticipating a rate hike by 25 basis points to 35 basis points. 

The rate hike comes at a time when the country's wholesale and retail inflation continues to remain above the RBI's comfort level for the seventh consecutive month this year. 

While the Consumer Price Index (CPI) based retail inflation stood at 7.01 per cent in June, the Wholesale Price Index (WPI) inflation remained at 15.18 per cent in June. This is the 15th month in a row that the WPI inflation has remained in double digits. 

Notably, apart from RBI other central banks across the world have also increased the key lending rates to record-level this year. The Bank of England raised the repo rate by 50 basis years, the highest in 27 years, to 1.75 per cent, whereas US Fed raised the benchmark lending rates by 0.75 percentage point interest rate increase, taking its benchmark rate to a range of 2.25-2.5 per cent. 

(With Inputs From PTI)

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