New Delhi: The Reserve Bank of India raised the Repo rate for the second time in a small period of 2 months. The repo rate is increased by 6.5% on account of inflationary pressures arising due to hikes in minimum support prices for the crop.
The RBI also raised its average inflation projection for the second half of the year to 4.8% from the 4.7% it had projected in June. The central bank expects inflation to edge higher to 5% in the first quarter of the next fiscal year. Five of the six members on the rate panel voted for a rate increase.
This will affect EMIs of housing and automobile loans for consumers. The central bank maintained its neutral monetary policy stance with the objective of containing inflation at 4 per cent within a band of 2 per cent, while supporting growth. On the growth outlook, RBI remains confident of strong economic activity supported by the monsoon, robust rural demand due to MSP hike and rising investment activity.
There has been a total of 50 bps hike in the repo rate over the last two MPC meeting since the start of the year, many banks have been increasing their MCLR.