RBI’s decision to hike repo rate is appropriate: IMF

Washington, June 8: The International Monetary Fund (IMF) has welcomed the decision of the Reserve Bank of India to increase the repo rate by 25 basis point to 6.25 percent.

 

IMF Spokesman Gerry Rice told this to reporters during his bi-weekly news conference in Washington. He said that the IMF thinks that this was an appropriate step by the RBI in the present context of rising inflation and additional upside risks to the forecasts due to higher oil prices, exchange rate depreciation and other domestic factors.

He was responding to a question on the decision of the RBI to increase the interest rate for the first time in the last four years.

It was in January 2014 that the RBI had increased the repo rate to eight percent to keep the inflation under check.

As per official data, retail inflation based on the Consumer Price Index (CPI) rose to 4.58 percent in April, from 4.28 percent in March, but remained outside the RBI's medium-term target of 4 percent.

The hike in the repo rate is likely to make the interest rates on loans dearer as it will make borrowing for banks expensive and they may charge higher from customers.

In the second bi-monthly monetary policy for the current fiscal, the RBI projected inflation for 2018-19 at 4.8- 4.9 percent in the first half and 4.7 percent in the second half of the year.