RBI hikes repo rate by 25 bps; reverse repo by 50 bps

The Reserve Bank of India (RBI) raised its key policy rates by up to 50 basis points (bps) at its mid-quarter monetary policy review as it seeks to contain inflation in a rapidly growing economy. The central bank hiked the repurchase rate (repo rate) by a quarter percentage point to 6% while the reverse repo rate was increased by 50 bps to 5%.



The Cash Reserve Ratio (CRR) was left unchanged at 6% while the Bank rate too was kept steady at 6%. The RBI has raised key policy rates four times since mid-March in a bid to check spiraling inflation, which has stayed above 10% on an annual basis in the five months through June amid strong economic growth.

The yield on the benchmark 10-year government bond rose to 7.99% after the RBI announcement versus 7.92% before the event. The rupee jumped to a three month high of 45.8250 as against 46.34 before the event.

Meanwhile, the stock market too shrugged off the RBI move. The BSE Sensex closed the week at 19,594 while the NSE Nifty ended at 5,894. Before the RBI hiked the policy rates, they were at 19,443 and 5,838, respectively.