TIL Desk/Business/Mumbai/ RBI Governor Urjit Patel has said the second 25 bps rate hike in as many months is to ensure that the Reserve Bank doesn’t drift away from its 4-per cent inflation mandate and keeps moving towards the target on sustainable basis.
Listing out a rash of headwinds — higher risks to inflation driven by domestic and external factors, trade wars which are slipping into a “currency war now”, uneven global growth and spiralling crude prices — RBI hiked the short-term policy rates or repo rate by a quarter of a percentage point to 6.5 per cent.
RBI bit the bullet for the first time since January 28, 2014 — when rates were hiked to 8 per cent — during the June 6 policy this year by hiking rate to 6.25 per cent from 6. In the subsequent years, it had cut the rates on six occasions. In its last revision, on August 2, 2017, rates were cut by 25 basis points to 6 per cent.
Following the second hike, the BSE Sensex slipped from record high to ends 84.96 points lower at 37,521.62. Anticipating firming of interest rate, SBI has raised fixed deposit rate by up to 0.1 per cent. Other banks are also likely to firm up lending rates making loans costlier for borrowers.
