RBI surprises with 25 bps repo rate hike

The central bank has increased the repo rate by 25 bps to 6.5 per cent in its third bi-monthly RBI policy review meeting for 2018-19. However, RBI has maintained a neutral stance on the economy.

This is the first time the RBI has raised the benchmark interest rate by 25 basis points in two consecutive policy meets. RBI also hiked reverse repo rate by 25 bps to 6.25 per cent. RBI's monetary policy committee (MPC) cited impressive corporate earnings, increase in investment activity as a basis for this raise.

The central bank has forecast GDP growth for the current fiscal at 7.4 per cent and expected it at 7.5 to 7.6 per cent for the second half of the fiscal.

Reacting to the news, the benchmark indices stepped down a notch from their highs and closed at in the red. The BSE Sensex closed at 37,521.62, down by 84.96 points or 0.23 per cent, while NIFTY50 closed at 11,346.20, down marginally by 10.30 point or 0.09 per cent and Nifty Bank closed at 27,596.60, down 0.60 per cent, on Wednesday.