RBI hikes key policy rates by 50 bps
26 Jul 2011
The Reserve Bank of India (RBI) today announced a 50 basis point increase in its key policy rates, in a bid to tame inflationary pressures that have started affecting the pace of economic growth in the country.
The central bank raised the repo rate under which it offers liquidity to scheduled banks by 50 basis points. The repo rate under the liquidity adjustment facility (LAF) will accordingly move up from 7.5 per cent to 8.0 per cent.
Consequently, the reverse repo rate under the LAF, which has a spread of 100 basis point below the repo rate, automatically adjusts to 7.0 per cent.
Similarly, the Marginal Standing Facility (MSF) rate, which has a spread of 100 bps above the repo rate, stands at 9.0 per cent against 8.0 per cent earlier, RBI said.
Announcing the monetary policy for RBI's first quarter (June-August 2011), governor D Subbarao said the policy decision has been informed by two broad considerations.
First, demand pressures have remained strong in the first half of 2011-12 as indicated in RBI's 3 May 2011 policy statement.
