REPO RATE INCREASED

Comment on recent rate hike:

• This is the second successive rate increase which highlights concerns wrt inflation.
  
  
• Reasons given by Reserve Bank of India (RBI) while increasing the rate are:
  • Risks to macroeconomic stability from a potential ‘currency war’ in the wake of rising global trade tensions,
    
    
  • Continuing volatility in crude oil prices; Oil supply disruptions due to geopolitical tensions.
    
    
  • Volatile global financial markets,
    
    
  • Increase in the minimum support price for kharif crops,
    
    
  • decline in the total sown area under kharif season due to deficient rainfall over a wider area than last year and
    
    
  • the impact of upward revisions to house rent allowance paid by State governments.
    
    
  
  
  
• RBI, under the monetary policy framework, is legally mandated to maintain inflation at close to the 4 %per cent mark. In this background, experts have regarded the recent RBI decision as a wise one.