2 hrs ago
RBI Raises Repo Rate, Says Cuts Off Table
India’s central bank has made borrowing a little more expensive by raising its main interest rate.
Governor Sanjay Malhotra said the bank is not planning to cut rates soon.
Its next move could be another increase or a pause, depending on how the economy and prices change.
The bank is concerned that prices may rise because of factors such as expensive oil and conflict in West Asia.
It also said inflation is not as well-behaved as it was last year.
The policy committee was not unanimous: four members supported the change in stance and two did not.
Changes in interest rates can take time to affect the economy.
The RBI raised its repo rate by 25 basis points, from 5.25% to 5.50%, and shifted its stance to calibrated tightening.
Governor Sanjay Malhotra said rate cuts are off the table for now; the next move could be a hike or a pause.
Four of six Monetary Policy Committee members backed the stance change, while two opposed it.
The RBI projected FY27 core inflation at 4.4% and CPI inflation averaging 5.8% over the remaining three quarters.
The bank cited higher oil prices, the West Asia conflict, market volatility and domestic inflation pressures as risks.
- Who
- The Reserve Bank of India and its Monetary Policy Committee, led by Governor Sanjay Malhotra.
- What
- The RBI raised the repo rate by 25 basis points to 5.50% and shifted to calibrated tightening.
- Where
- India.
- When
- Wednesday; the article does not specify a date.
- Why
- The RBI cited rising inflation risks, including higher crude oil prices, domestic pressures and uncertainty linked to the West Asia conflict.
Support for tighter policy
Reservations about the stance change
Moving to calibrated tightening
Support for tighter policy
Four MPC members supported shifting from a neutral stance, amid rising inflation risks.
Reservations about the stance change
Two MPC members voted against the change in stance.
Key facts
- New repo rate
- 5.50%, up from 5.25%
- Rate increase
- 25 basis points
- Policy stance
- Changed from neutral to calibrated tightening
- MPC vote
- Four members supported the stance change; two opposed it
- Projected FY27 core inflation
- 4.4%, compared with the previous estimate of 4.3%
- Projected CPI inflation
- An average of 5.8% over the remaining three quarters of FY27
- Other adjusted rates
- Standing deposit facility rate: 5.25%; marginal standing facility rate and Bank Rate: 5.75%
- August retail inflation
- 4.82%, above the RBI's 4% medium-term target for a third consecutive month
Sources
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