RBI Governor Shaktikanta Das stated on Wednesday that the Reserve Bank of India’s monetary policy committee increased the key lending rate by 40 basis points, citing ongoing inflationary pressures in the economy.
The repo rate is the rate at which commercial banks borrow money from the central bank by selling their assets, whereas the reverse repo rate is the rate at which the central bank borrows money. As India’s embryonic economic recovery continues, these rates are critical in boosting loans and investments by enterprises. The evaluation of the economy by the Monetary Policy Committee (MPC) is crucial for markets and corporate sentiment.
After the RBI hiked its policy rate, India’s 10-year benchmark bond yield increased to 7.41 percent. MPC would maintain its accommodative monetary policy stance, according to Das, even if global inflation rises sharply and investment activity picks up in the country.
“The MPC determined that the inflation outlook necessitates an appropriate and timely reaction through resolute and calibrated efforts to ensure that second-round effects of supply-side shocks on the economy are limited and long-term inflation expectations are maintained firmly anchored,” Das added.
