RBI hikes Repo rate by 25 bps to 6.5%, What impact will this have?

The Reserve Bank on Feb. 08 hiked key benchmark policy rate by 25 basis points to 6.5 per cent, citing sticky core inflation. This is the sixth time interest rate has been hiked by the Reserve Bank of India (RBI) since May last year, taking the total quantum of hike to 250 basis points. Announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) by a majority decided to raise the policy repo rate by 25 basis points and keep a 'strong vigil' on inflation outlook. ''Policy rate at 6.5 per cent still trails the pre-pandemic level,'' Das said, adding that core inflation will remain sticky. Core inflation generally refers to inflation in manufactured goods. The governor said the inflation will moderate in the next fiscal but remain above the 4 per cent level. The RBI is mandated to keep inflation at 4 per cent with a margin of 2 per cent on either side. For the next fiscal, the RBI projected a growth rate of 6.4 per cent. In the latest Economic Survey of the finance ministry, growth projection was 6-6.8 per cent for 2023-24. According to Das, the retail inflation will average 6.5 per cent in the current fiscal and moderate to 5.3 per cent in 2023-24. Indian economy has remained resilient demand global headwinds, Das said.