Hike in Repo rates to growth projection: Highlights of RBI monetary policy

Mumbai: Following a cycle of rate cuts begun in January 2015, the RBI on Wednesday raised its key interest rate for the first time by 25 basis points to 6.25 per cent, a central bank announcement said. “Consequently, the reverse repo rate under the liquidity adjustment facility (LAF) stands adjusted to 6.0 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.50 per cent,” the Reserve Bank of India said.

“The decision of the Monetary Policy Committee (MPC 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,” it added.

The following are the highlights of the second bi-monthly monetary statement for 2018-19:

• RBI hikes key lending rate (repo) by 0.25 per cent to 6.25 pc.
• Rate hike is the first in four-and-half-years.
• Reverse repo rate stands at 6 pc, bank rate at 6.50 pc.
• Growth projection retained at 7.4 pc for 2018-19.
• Projects retail inflation at 4.8-4.9 pc for April-September, 4.7 pc in H2.
• Major upside risk to the inflation path as price of crude rose by 12 pc.
• Volatile crude oil prices adds to uncertainty to the inflation outlook.
• Investments recovering well; to get boost from swift resolution under IBC.
• Geo-political risks, financial market volatility, trade protectionism to impact domestic growth.
• Adherence to budgetary targets by the Centre and states will ease upside risks to the inflation outlook.
• All members of the monetary policy committee voted for 0.25% rate hike.
• Next meeting of the MPC on July 31 and August 1.