The Reserve Bank has hiked policy rates once again in its battle against inflation. On Thursday it raised the repo and reverse repo rates by 25 basis points each. The repo, which is the rate at which it lends to banks, is now at 6.75%. And the reverse repo, which is the rate at which it takes money from banks, is at 5.75%. The RBI said it would continue to remain on guard against inflation. It also hiked its forecast for headline inflation in March to 8%. That’s compared to its earlier forecast of 7%.
Meanwhile there’s good news on inflation, with the food price index easing in beginning of March. The index rose 9.42% in the period to 5 March. The previous week it had gone up 9.52%. The slowdown in food inflation was largely due to a fall in potato prices. And while the government was pinning its hopes on a bumper wheat crop in the winter, wheat prices continued to increase in the week to 5 March.
The RBI’s rate hikes sent Indian markets plummeting on Thursday. The Sensex lost 209 points to 18,150. And the Nifty tumbled 65 to close at 5,447.