RBI hikes key interest rates by 25 basis points

MUMBAI - The Reserve Bank of India (RBI) Tuesday hiked its short-term borrowing and lending rates by 25 basis points, continuing with its tight monetary policy stance to tame inflation, but hinted that the rates would not undergo any more changes in the immediate future.

The repurchase rate now stands revised to 6.25 percent from the earlier 6 percent, while the reverse repurchase rate has been hiked to 5.25 percent from 5 percent. The cash reserve ratio (CRR) has been kept unchanged.

“Based purely on current growth and inflation trends, the Reserve Bank believes that the likelihood of further rate actions in the immediate future is relatively low,” said RBI Governor D.Subbarao.

The RBI said Monday that inflation needed to come down from current levels for interest rate hikes to ease off.

In the previous mid-quarter review Sep 16, the central bank had hiked its short-term borrowing and lending rates by 50 basis points and 25 basis points.

Inflation has been the driving force behind the tweaking of interest rates, something the central bank has now done six times this year.

The overall annual inflation rate has fallen in recent months, but is still at a high level of 8.62 percent as recorded in September. The 52-week rise in food prices is also in double-digits at 13.75 percent for the week ended Oct 16.