The Reserve Bank of India’s key interest rate was raised by 50 basis points in the second hike in as many months, in a bid to cool persistently high inflation. The monetary policy committee (MPC) raised the key lending rate or the repo rate by 50 basis points (bps) to 4.90%.
The Standing Deposit Facility rate and the Marginal Standing Facility Rate were adjusted higher by the same quantum to 4.65% and 5.15%, respectively. RBI Governor Shaktikanta Das had said a June 8 move was a no brainer. But analysts polled by Reuters had been divided over how much it would hike, with forecasts ranging between 25 and 75 bps.
Wednesday’s increase follows a 40-bps rise in early May at an unscheduled meeting that kicked off the central bank’s tightening cycle, which economists expect to be relatively short. “Upside risks to inflation as highlighted in last policy meetings have materialized earlier than expected,” Das said after the policy decision.
He said inflation will likely remain above the RBI’s upper tolerance band in the first three quarters of the financial year that started on April 1.