RBI hikes interest rate by 25 basis points

By Realty Quarter Bureau

In the second bi-monthly monetary policy for the current fiscal, the central bank revised upwards the retail inflation range to 4.8-4.9 % in the first half of 2018-19, and 4.7 % in the second half

The Reserve Bank for the first time in four-and-half-years raised key interest rate today by 25 basis points to 6.25 per cent on inflation concerns arising from surge in international oil prices.

In the second bi-monthly monetary policy for the current fiscal, the central bank revised upwards the retail inflation range to 4.8-4.9 % in the first half of 2018-19, and 4.7 % in the second half.

It includes the impact from HRA for central government employees, with risks tilted to the upside.

With all the six members voting for a increase in policy rates, the Monetary Policy Committee raised “repo rate by 25 basis points and kept the stance neutral”, RBI said in a statement here.

Excluding the impact of HRA revisions, CPI-based inflation is projected at 4.6 per cent in first half of 2018-19, and 4.7 per cent in H2, RBI said.

RBI retained the GDP growth for the financial year 2018-19 at 7.4 per cent.

“The resulting pick-up in the momentum of inflation excluding food, fuel and HRA has imparted persistence into higher CPI (Consumer Price Inded) projections for 2018-19,” RBI said in the policy.

“Crude oil prices have been volatile recently and this imparts considerable uncertainty to the inflation outlook – both on the upside and the downside,” it said.

The April policy RBI had projected CPI inflation for 2018-19 to be at 4.7-5.1 per cent in H1 and 4.4 per cent in H2, which included the HR impact for central government employees.