RBI hikes lending rate by 35 basis points to manage inflation

Mumbai: The Reserve Bank of India (RBI) on Wednesday raised the benchmark lending rate by 35 basis points to 6.25 percent in a bid to tame inflation, which has remained above its tolerance level for the past 11 months. The six-member Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das decided by majority view in favour of the rate hike. With the latest hike, the repo rate or the short-term lending rate at which banks borrow from the central bank now has crossed 6 percent. This is the fifth consecutive rate hike after a 40 basis points increase in May and 50 basis points hike each in June, August and September. Overall, the RBI has raised the benchmark rate by 2.25 percent since May this year.

CPI inflation stands at 6.7% & retail inflation at 6%

The Consumer Price Index (CPI) based inflation, which RBI considers as an important factor while fixing its benchmark rate, stood at 6.7 percent in October. Retail inflation has been ruling above the RBI's comfort level of 6 percent since January this year. Das retained the inflation projection at 6.7 percent for the current fiscal. The RBI has slashed its GDP growth forecast to 6.8 percent from an earlier estimate of 7 percent for the current fiscal.

In its last bi-monthly policy review released in September, the RBI had slashed the economic growth projection for the current financial year to 7 percent from 7.2 percent earlier on account of extended geopolitical tensions and aggressive monetary policy tightening globally.

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