RBI HIKES REPO, REVERSE REPO
RBI HIKES REPO, REVERSE REPO: – In a delayed but expected move, RBI finally acted and raised the Repo and Reverse Repo rate by 25bps each. CRR was left untouched as there was liquidity tightness in the market. The rate hike was expected since the past two weeks. This time the RBI was behind the curve in reacting to the economic situation. This rate hike was a calibrated move as one can expect further interest rate hike of 25bps in credit policy meet in the last week of July. RBI has shifted focus on controlling inflation without hurting growth as the inflation was reaching very high levels.
The inflation would increase further due to the fuel price hike in the last week and not to forget strong IIP numbers. RBI is now more worried about the upside risk to inflation than downside risk to growth.
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