Reserve Bank of India raises key lending rate as expected, comments in focus

THE Reserve Bank of India’s key interest rate was raised by 50 basis points on Wednesday as widely expected, in the second hike in as many months, in a bid to curb 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 per cent. The Standing Deposit Facility rate and the Marginal Standing Facility Rate were accordingly adjusted higher by the same quantum to 4.65 per cent and 5.15 per cent, 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. Analysts also expect the RBI to reduce liquidity, reinforcing its fight against inflation and extending its effort to return monetary conditions to what they were like before the Covid-19 pandemic prompted radical action to stimulate the economy. REUTERS