#RBIPolicy: RBI Hikes Key Interest Rate For The First Time In 4 Years

| June 6 , 2018 , 18:00 IST

The Reserve Bank of India on Wednesday raised its key interest rate (repo rate) for the first time in four years by 25 basis points to 6.25 percent. As per the bank’s announcement, this was in response to concern on inflation from surging global crude oil prices.

The central bank also raised the reverse repo rate by 25 points to 6 percent. The bank however maintained ‘Neutral’ stance on the policy allowing itself the ability to move either way.

A statement from the RBI reads, "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."

"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 statement added.

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The monetary policy committee of the RBI that is responsible for fixing the benchmark interest rate unanimously voted for the rate hike which the bank undertook for the first time after the Narendra Modi led NDA Government came to power. While three members of the committee are ex-officio, the other three members are Senior Professors holding the office for a fixed duration of four years.

Addressing the media RBI Governor Urjit Patel said that the GDP Growth for 2017-18 had been revised and estimated at 6.7% backed by an all-time high production of food grains, strengthening of industrial growth and resilient service industry.