RBI increases repo rate by 25 bps to 6.25%; maintains neutral stance

The six-member monetary policy committee (MPC) on Wednesday unanimously voted for a rate hike, citing the fear of inflation, partly flared by the recent spike in crude oil prices. The hike in policy repo rate to 6.25 per cent from 6 per cent was contrary to market expectation that the central bank will hold rates and the unanimous decision came as a surprise to the markets.

The central bank’s April policy tone was dovish and it had actually lowered inflation forecasts for the first and second half of 2018-19. On Wednesday, the inflation outlook was revised up once again.

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