RBI hikes key lending rate

Written by | January 28, 2014 | 0

Mumbai Jan 28: Reserve Bank Governor Raghuram Rajan on Tuesday again surprised the markets and raised the key policy rate by 0.25 per cent to 8 per cent in a bid to curb inflation, a move that may translate into higher EMIs and push up the cost of borrowing for corporates.

“..an increase in the policy (repo) rate by 25 basis points is needed to set the economy securely on the recommended disinflationary path,” Dr. Rajan said while unveiling the Third Quarter Review of Monetary Policy.

Consequently, the reverse repo rate under the liquidity adjustment facility will be revised to 7 per cent and the marginal standing facility rate and bank rate to 9 per cent.

However, the RBI kept the cash reserve ratio unchanged at 4 per cent as liquidity seems to be comfortable.

It was widely expected that Dr. Rajan would maintain the status quo on rates to support growth. Ahead of the quarterly review, Rajan had termed inflation a “destructive disease.

Filed in: Business

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