New Delhi: The Reserve Bank of India on Wednesday, raised its policy repo rate for the second straight meeting citing inflation while maintaining a “neutral” stance. It was raised by 25 basis points to 6.5 % in the second such hike in three months.
The reverse repo rate or the rate at which RBI borrows from commercial banks stands adjusted to 6.25 %.
Following the policy rate announcement, RBI governor Urjit Patel said,”The main reason for changing the policy rate is to ensure that, on a durable basis, we come to and maintain the 4% (inflation) target. We have been away from the 4 per cent number for several months now.”
This move will affect EMIs of housing and automobile loans for consumers.
The central bank maintained its neutral monetary policy stance with the objective of containing inflation at 4% within a band of 2% while supporting growth.
Experts were surprised with RBI’s neutral stance. “The hike was expected, but what is surprising is the stance has remained ‘neutral’. We were expecting that since this is the second consecutive hike in two policies, the stance would be changed to ‘tightening’,” said Anagha Deodhar, Economist, ICICI Securities.
Thirty-seven of 63 economists in a Reuters poll last week said the RBI will raise rates, while 22 said the next hike would come later this year, or early in 2019