IMF welcomes RBI decision to hike interest rates

The International Monetary Fund (IMF) on Friday welcomed the Reserve Bank of India (RBI)'s decision to raise the Repo Rate by 25 basis point to 6.25 per cent and Reserve Repo Rate at 6.50 per cent.

"We welcome the Reserve Bank of India's decision to increase the policy rate by 25 basis points," IMF Spokesman Gerry Rice told PTI. Rice was addressing a press conference during his bi-weekly news conference in Washington.

The decision to increase the Repo and Reserve Repo rate was taken after RBI's three-day-long Monetary Policy Committee (MPC) meet in Mumbai. 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.

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The move came against the backdrop of the rising commodity inflation, global volatility in crude and other domestic factors. Keeping those factors in mind IMF thought that this was an appropriate step by the RBI on Wednesday.

Addressing a press conference RBI Governor Urjit Patel on Wednesday said, "Gross domestic product (GDP) growth for 2017-18 has been revised and estimated at 6.7 per cent backed by an all-time high production of food grains and horticulture, strengthening of industrial growth and resilient services sector activity".

This was the first time that interest rates were increased since Narendra Modi-led NDA government came to power in May 2014. Rates had been on hold since the last cut in August 2017.

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In January 2014 the RBI had increased the repo rate to eight per cent to keep the inflation under control.