RBI Policy| MPC hikes repo rate by 35 bps; refuses to lower guard on inflation
The Reserve Bank of India's monetary policy committee (MPC) on December 7 hiked the key repo rate by 35 basis points (bps) to 6.25 % in its last meeting of 2022, continuing its fight against inflation. Repo is the rate at which the central bank lends short-term funds to banks. One basis point is one-hundredth of a percentage point. The MPC has been on a rate hike course throughout the year, increasing policy rates by nearly two percentage points to fight inflation. Retail inflation has remained above the central bank's comfort level for nearly the entire year. By law, the MPC is required to keep inflation within the 2-6 percent band. As it failed to meet that mandate, the panel met in November early November to write a letter explaining its failure and the steps it planned to take to cool prices. This is the first time since the MPC was set up in 2016 that such a letter had to be drafted. The MPC decision to hike rates came in the backdrop of stubbornly high inflation, which ha...