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RBI Hikes Repo Rate by 35 bps to 6.25% Citing Inflation

NEW DELHI: The RBI on Wednesday for the fifth time in a row hiked its key lending rates aka repo rate by more 35 basis points to 6.25per cent with immediate effect. The committee cited slowing inflation after three consecutive 50 bps increases to manage price pressures that have remained persistently above the upper ends of its target band.

Retail inflation slowed to 6.77% in October having stayed above the upper end of the RBI’s 2-6% tolerance band all year, down from 7.41% in September and 7% in August.

“Our financial system remains robust and stable, and corporates are healthier than before. India is widely seen as a bright spot in an otherwise gloomy world,” said RBI Governor Shaktikanta Das in his policy statement addressing a press conference today. Das added that RBI has lowered its GDP growth forecast for FY23 to 6.8 percent from 7 percent earlier.

The repo rate, also called the policy rate, is the interest at which RBI lends money to commercial banks. This is the fifth rate hike by the RBI in FY 2022-23. Earlier, the RBI had raised the repo rate by 40 bps in May and 50 bps in June, August, and September. 

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