New Delhii : The Reserve Bank of India on Tuesday hiked Repo rate – the key policy rate at which the central bank lends short-term funds to banks- by 50 basis points . The raised repo rate is 4.90 and would mean banks will in turn charge its customers higher interest. RBI step is part of its fight to put down rising inflation
Retail inflation rose to near eight-year high of 7.79 percent in April from 6.95 in March. The RBI’s Monetary Policy Committee(MPC) has predicted the inflation at 6.7 percent.
MPC’s latest inflation print confirms that persistently high inflation is the biggest worry for policymakers at the moment. The MPC is mandated to keep Consumer Price Indiex(CPI) inflation within the 2 – 6 percent band and a breach for three straight quarters will mean, it will have to explain to Parliament why it failed to do that. The latest CPI is well above the upper bound of RBI’s 2 – 6 percent tolerance ban and it is the 31st consecutive month in which it has remained above the medium -term target of 4 percent.