The Reserve Bank of India announced a raise in the lending borrowing rates by 25 basis points applicable with immediate effect. Now the Repo Rate is fixed at 6.5 percent and the Reverse Repo Rate at 5.5 percent.
The Governor of Central Bank Mr D Subbarao said "Indeed we did (consider 50 basis point hike)...Its not as if it was straight-forward decision that fell out of some analytical model."
He also said , "Dilemma before Reserve Bank mainly was how to balance between concern of growth and concerns of inflation...Our challenge is to restrain demand pressures in the short term, and support supply response. So, with one monetary policy instrument how do we restrain demand and support supply, that has been the challenge."
RBI is desperately trying to curb out the inflation problem from the Indian market and it is yet another step from the Central Bank in the same direction.
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