India’s key policy rate raised by 50 bps as widely predicted

THE Reserve Bank of India’s (RBI) benchmark repo rate was raised by 50 basis points on Friday (Sep 30), the fourth straight increase in the current cycle, as policymakers extended their battle to tame sustained above-target retail inflation rate.

The monetary policy committee (MPC), comprising of 3 members from the RBI and 3 external members, raised the key lending rate or the repo rate to 5.90 per cent with a 5 out of 6 majority.

The standing deposit facility rate and the marginal standing facility rate were also increased by the same quantum to 5.65 per cent and 6.15 per cent, respectively.

The US Federal Reserve’s relentless and aggressive interest rate hikes over recent months have sent the rupee down sharply and prompted most economists to predict another 50 bps increase. The MPC has raised rates by a total of 140 bps in the last 3 meetings, including consecutive 50 bps moves in the last 2.

India’s annual retail inflation rate accelerated to 7 per cent in August, driven by a surge in food prices, and has stayed above the RBI’s mandated 2-6 per cent target band for 8 consecutive months. REUTERS