On September 30, The Reserve Bank of India (RBI) declared a 50 basis points hike in the repo rate to step up its fight against stubbornly higher inflation. The term ‘Repo’ is the rate at which the central bank loans short-term funds to commercial banks. Thus, One bps is 100th of a percentage point. Observing the newest rate hike, the repo rate now stands at 5.9%.

Proclaiming the monetary policy decision, RBI Governor Shaktikanta Das highlighted the concern of the rate-setting panel on inflation. He said the central bank is inspecting the price situation closely. The Monetary Policy Committee (MPC) instigated its three-day meeting on September 28 and will announce the consequence on September 30. This week, a 50 bps upsurge in the repo rate is the fourth consecutive one since May and the third time since June. The repo rate, at which the RBI lends short-term funds to banks, to 5.9%, is the highest since April 2019, from 5.4% at present.

The MPC has enlarged the policy repo rate by 140 bps since May to suppress inflationary pressure. The Consumer Price Index (CPI) based retail inflation, which had started viewing signs of moderation in May, has again increased to seven per cent in August. The RBI takes notice of the retail inflation while framing its bi-monthly monetary policy.

The Monetary Policy Committee voted with a 5-1 majority to increase the repo rate by 50 bps to 5.9%, announced RBI Governor Shaktikanta Das. Economic activity in India “vestiges stable.” It gives us the self-confidence to deal with the hostile policies of other central banks. Inflation endures to be at alarmingly high levels across dominions, he added.