The Reserve Bank of India (RBI) on Friday raised repo rate by 25 bps to 8.25%. The reverse repo rate has gone up to 7.25 per cent from 7%.Â The RBI has taken this decision to fight the spiralling inflation. This is the 12th hike in 18 months by RBI. According to some experts, interest rate rise had almost become inevitable after inflation in August came in at 9.78% – a 13-month peak, the highest for any large economy, and almost double the RBI’s comfort level of 5.0%.
The latest inflation data were fuelled by price rises in food, fuel and manufactured goods.
The government and business leaders, however, hope the hawkish central bank may pause soon in raising interest rates as economic growth slows due to the relentless tightening.