RBI increases repo rate under LAF by 25bps to 6.5%

01 Aug '18

2 min read

Courtesy: Sohel Patel from Pexels

The Monetary Policy Committee (MPC) of the Reserve Bank of India has increased the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 6.5 per cent. Consequently, the reverse repo rate under the LAF stands adjusted to 6.25 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.75 per cent.

“The decision of the MPC is consistent with the neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth,” the RBI said in its Third Bi-monthly Monetary Policy Statement, 2018-19.

The MPC noted that domestic economic activity has continued to sustain momentum and the output gap has virtually closed. However, uncertainty around domestic inflation needs to be carefully monitored in the coming months.

In addition, recent global developments raise some concerns. Rising trade protectionism poses a grave risk to near-term and long-term global growth prospects by adversely impacting investment, disrupting global supply chains and hampering productivity, the statement said.

Geopolitical tensions and elevated oil prices continue to be the other sources of risk to global growth, it added. (RKS)

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