Rajan does the unexpected, hikes repo rate by 25 bps

Moneycontrol Bureau

Keeping his track record of doing the unexpected, RBI governor Raghuram Rajan has hiked the repo rate by 25 bps to 8 percent. He however, kept the CRR unchanged at 4 percent at the quarterly monetary policy. The marginal standing facility (MSF) rate was hiked by 25 bps to 9 percent.

The rate hike came at a time when the markets players and analysts were expecting the rates to be kept unchanged.

The majority of the candidates polled by CNBC-TV 18 did not believe the RBI will announce any change in its stance for the rest of the financial year. Only 5 percent feel a 25 basis points repo rate hike can come through. Around 10 percent respondents see 25 bps hike and another 10 percent expect 25 bps cut till March-end.

After taking over the reins as the governor of the central bank, Raghuram Rajan, had raised rates twice. He, however, left the repo rate unchanged at 7.75 percent in the last monetary policy in December but said that he will keep an eye on inflation.

“Nobody should doubt our desire to fight inflation and our belief that interest rates are our main tool that we have. Nobody should doubt that,” Rajan had said in December.

He said RBI will wait for the next set of data on inflation and industrial growth before taking a call on interest rates. “We want to see data on how the work we have done so far is playing out and then we will take the next step,” he had said, adding, “Don’t judge me by whether I raise interest rates in every meeting.”