DAINIK NATION BUREAU
The Reserve Bank of India (RBI) on Wednesday hiked the key lending or repo rate by 25 basis points to 6.25 per cent as it announced its second bi-monthly monetary policy statement for 2018-19. The repo (or repurchase) rate is the rate of interest which the RBI charges to lend short-term loans to the commercial banks. The reverse repo rate under which the RBI borrows from banks was adjusted to 6 per cent. “The decision of the MPC (Monetary Policy Committee) 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 RBI said in its policy statement.
The RBI retained the GDP growth for 2018-19 at 7.4 per cent as in the June policy.
RBI’s decision was surprising because most experts were expecting the RBI to take a hawkish stance in the June policy review and to go for a rate hike only in August. According to a Reuters poll, which was taken before the figures for the gross domestic product (GDP) were released, 21 of 57 economists, or about 40 per cent, expected the RBI to raise interest rates in the June meeting. However, in a snap poll of 56 economists taken after the GDP data release, 26 of the respondents, or about 46 per cent, said that they expect the RBI to take the repo rate higher in June.