RBI hikes
Repo Rate from 7.5 per cent to 8 per cent
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The Reserve Bank of India in a bid to tame
inflationary pressure, hiked the short-term indicative policy rate by 50 basis
points from 7.5 per cent to 8 per cent on July 26. The RBI Governor D. Subbarao
also announced the first quarter review of Monetary Policy for 2011-12
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The first quarter review of Monetary Policy for
2011-12 revealed that headline wholesale price index inflation rate for the
first quarter of 2011-12 remained stubbornly close to double digits and
inflationary pressures continued to be broad-based.
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The decision to raise the rate by 50 basis
points, beating the market expectation of 25 basis points was taken to drive
home the fact that in the absence of complementary policy responses on demand
and supply sides, stronger monetary policy actions are required.
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With the hike in repo rate the reverse repo rate
settled at 7 percent. Similarly, the Marginal Standing Facility rate stood
recalibrated at 9 percent.
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The hike by the central bank in rates is
expected to put further pressure on consumers as lending rates of banks will be
higher.
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The RBI also revised the WPI inflation
projection for March 2012 from 6 percent to 7 percent. However, the central
bank retained the projection of real GDP growth for the current year at 8 per
cent. RBI pointed out that crude oil prices that remained volatile were a major
risk factor.
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