RBI Monetary Policy: RBI Hikes Interest Rates By 25 Basis Points

The Monetary Policy Committee (MPC) of the Reserve Bank of India that met over the last couple of days decided to hike interest rates by 25 basis points taking the repo rate to 6.5%. There were mixed opinions on interest rates with some observers feeling that the MPC would pause, while some predicted a small hike in interest rates. Out of 6 MPC members, 4 members voted in favour of the interest rate hike. "The outlook remains clouded by geopolitical tensions, oil prices. The world is looking to India to energise global partnership in several critical areas," said RBI Governor Shaktikanta Das. Economists at SBI said they expected the Reserve Bank of India to hit the pause button on interest rate hike at its upcoming monetary policy review.

With the headline inflation coming below the 6 per cent-mark for the second consecutive month in December, several other economists were expecting a final hike of 0.25 per cent in the repo rates before the central bank opts for a longish pause.

"The RBI is likely to deliver a 25ps hike this week. We expect the MPC to also ease its pace of rate hikes further and deliver 25bps in February after 35bps in December (total repo hike of 225bps and effectively 335bps so far) expect the MPC to also ease its pace of rate hikes further and deliver 25bps in February after 35bps in December (total repo hike of 225bps and effectively 335bps so far)," Emkay Global had said in its report earlier this week.