RBI hikes interest rate by 25 bps to 6.25% after a gap of four-and-half-years on inflation concerns

Mumbai: The Reserve Bank for the first time in four-and-half-years raised key interest rate on Wednesday by 25 basis points to 6.25 percent on inflation concerns arising from surge in international oil prices. In the second bi-monthly monetary policy for the current fiscal, the central bank revised upwards the retail inflation range to 4.8-4.9 percent in the first half of 2018-19, and 4.7 percent in the second half. It includes the impact from HRA for central government employees, with risks tilted to the upside. [caption id=“attachment_4495023” align=“alignleft” width=“380”] RBI logo. AFP.[/caption] With all the six members voting for a increase in policy rates, the Monetary Policy Committee raised “repo rate by 25 basis points and kept the stance neutral”, RBI said in a statement here. Excluding the impact of HRA revisions, CPI-based inflation is projected at 4.6 percent in first half of 2018-19, and 4.7 percent in H2, RBI said. RBI retained the GDP growth for the financial year 2018-19 at 7.4 percent. “The resulting pick-up in the momentum of inflation excluding food, fuel and HRA has imparted persistence into higher CPI (Consumer Price Inded) projections for 2018-19,” RBI said in the policy. “Crude oil prices have been volatile recently and this imparts considerable uncertainty to the inflation outlook – both on the upside and the downside,” it said. The April policy RBI had projected CPI inflation for 2018-19 to be at 4.7-5.1 percent in H1 and 4.4 percent in H2, which included the HR impact for central government employees.