RBI hikes interest rates to tame inflation

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MUMBAI: The Reserve Bank today raised its key short-term lending rate by 25 basis points and borrowing rate by 50 basis points to check rising prices.

" Inflation remains the dominant concern in macroeconomic management", RBI said while raising the repo (lending) and reverse repo (borrowing) rates to 6 per cent and 5 per cent, respectively.

The new rates, which comes into effect immediately, were announced as part of the first scheduled mid-quarterly review of the monetary policy.

The hike in rates will lead to a rise in cost of funds for the banks and eventually makes loans expensive, which will reduce consumption.