India Central Bank Raises Key Interest Rate by 50bps to Tackle Surging Inflation

The Reserve Bank of India raised its key interest rate by 50 basis points on Wednesday in a move to tackle rising inflation amid spiking energy and food prices.

The 50 basis points was in line with the majority of market expectations as the policy rate will be raised to 4.90% after the meeting of the Monetary Policy Committee (MPC). Meanwhile, the Standing Deposit Facility rate and the Marginal Standing Facility Rate were adjusted higher by the same figure to 4.65% and 5.15%, respectively.

A hike was necessary as retail inflation in April increased to 7.79% from the same period of last year, which was above the central bank’s tolerance band for inflation of 2% to 6%.

RBI Governor Shaktikanta Das indicated that there may be another hike in the repo rate though he refrained from quantifying it.