RBI hikes repo, reverse repo rates by 0.25 per cent
02 Nov 2010
The Reserve Bank of India today raised its key interest rates for the sixth time since February this year, as was widely expected, in yet another attempt to cool rising prices, but said the possibility of further rate hikes in the near-term is low.
RBI raised its repurchase (repo) rate, or overnight lending rate to commercial banks, by 25 basis points (0.25 per cent) to 6.25 per cent, and the reverse repurchase rate, or borrowing rate, by the same margin, to 5.25 per cent.
It kept the cash reserve ratio - the percentage of deposits that lenders must keep with the central bank in cash - unchanged at 6 per cent.
"Based purely on current growth and inflation trends, the Reserve Bank believes that the likelihood of further rate actions in the immediate future is relatively low," it said in the monetary policy review for the fiscal second quarter that ended 30 September. It, however, reiterated its concerns over flaring inflation driven by high food prices that haven't eased despite good monsoon rains.
Food prices were being fuelled by structural issues than just supply shortages, it said. "Given the spread and persistence of inflation, demand-side inflationary pressures need to be contained and inflationary expectations anchored," it said.
The RBI forecast inflation at the end of the fiscal year in March at 5.5 per cent as measured by the new wholesale price index, which it said was the same as the previous projection of 6 per cent under the old series.
