Tuesday, January 28, 2014

RBI monetary policy: Hikes repo rate to 8%, adjusts reverse repo rate at 7%, holds CRR at 4%

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Governor of the Reserve Bank of India (RBI) in his stern measure to tackle inflation has hiked repo rate yet again by 25 basis points (bps) to 8%. RBI has kept cash reserve ratio (CRR) unchanged at 4%, however, in its monetary policy review on Tuesday. The change has been extended to reverse repo rate, which stands adjusted at 7%, while the marginal standing facility (MSF) has been increased as well along with the Bank Rate at 9%.
Governor Raghuram Rajan was widely expected to hold interest rates. The rates were unchanged even in the last fiscal policy review held on 18 December. In the second quarter review on 29 October, repo rate was hiked and marginal standing facility (MSF) was cut by 25 bps each. It is evident that the move to hike repo rate is an after effect of the lately released Report of the Expert Committee to Revise and Strengthen the Monetary Policy Framework by Deputy Governor RBI, Urjit Patel. The report had recommended anchoring CPI inflation to review RBI monetary policy.

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