Economic Buzz: RBI Hikes Rates, Maintains Neutral Stance

Indias central bank Wednesday hiked the key repo rate by 25 basis points to 6.25%. Repo rate is the short-term rate at which the central bank lends money to commercial banks. The decision to raise the repo rate to 6.25% from the earlier 6 percent was taken by the Reserve Bank of India after its monetary policy committee (MPC) ended its three-day meeting.

Earlier, in four previous policy reviews, the MPC left the repo rate for commercial banks unchanged at 6 percent, the Reserve Bank said in a statement. Consequently, the reverse repo rate has also been raised by 25 basis points to 6 percent by the MPC chaired by Reserve Bank Governor Urjit Patel. This is the first time the Reserve Bank has hiked the repurchase rate since January 2014.

However, MPC maintained its neutral stance on monetary policy, keeping with its objective of achieving 4 percent retail inflation in the medium term, the Reserve Bank said in a statement. As per official data, retail inflation based on the Consumer Price Index (CPI) rose to 4.58 percent in April, from 4.28 percent in March.