Mumbai: Ihe Reserve Bank of India raised its repurchase rate by 40 basis points to 4.40 per cent, Governor Shaktikanta Das said in a statement, citing the need to keep inflationary pressures in check. It also raised the cash reserve ratio by 50 basis points.
The repo rate is the interest rate at which the RBI lends short-term funds to banks.
Based on the assessment of the macroeconomic situation and the outlook, the Monetary Policy Committee voted unanimously to increase the policy repo rate by 40 basis points to 4.40 per cent with immediate effect, Das said.
The decision was taken in the unscheduled meeting of the Monetary Policy Committee.
“The MPC continues to be accommodative while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward,” the RBI Governor said.
This is the first increase in the policy repo rate since May 2020.
Indian bonds tumbled along with stocks after the monetary authority raised its key rate in an emergency move amid rising inflationary pressures and ahead of a Federal Reserve decision.
The yield on the benchmark 10-year bond rose as much as 30 basis points to 7.42 per cent, its highest since 2019, after the decision. Stocks fell to a two-month low, while the rupee jumped.