RBI raises repo rate by 25 basis points to 6.5%

New Delhi: The Reserve Bank of India on Wednesday raised the repo rate — or the rate at which the central bank lends money commercial banks or financial institutions — by 25 basis points to 6.5%

The bank was expected to make a small increase since retail inflation has finally come within its tolerance band of 2% to 6% in the last two months of 2022.

The RBI had raised the key lending rate by 35 basis points in December, after three straight 50 bps hikes, and had said its fight against inflation was not over yet.

On Tuesday, governor Shaktikanta Das said the recently-concluded meeting of its monetary policy committee — responsible for fixing benchmark interest rates — decided by a 4:2 vote to remain focused on withdrawal of the accommodative policy, adding the world economy did not look so grim now and in fact, inflation was coming down.

Earlier on Tuesday, US Federal Reserve Chair Jerome Powell had also said disinflation had started and that he expected significant declines in inflation this year. This raised hopes in world markets of less aggressive rate hikes in the future.

Das also said that the Indian economy remained resilient amid global “volatile global developments”. But he warned that core inflation remained sticky and that weak global demand and the current economic environment could be a drag on domestic growth.