The Reserve Bank of India's Monetary Policy Committee has increased the benchmark repurchase rate by 25 basis points from 6.25 percent to 6.50 percent at its policy review held today, in line with the consensus forecast. This rate has now been increased by a cumulative 250 basis points since the initial rate hike by officials last April as part of efforts to subdue inflationary pressures. A majority of committee members again pledged at today's meeting to focus on the"withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth."

Data released since the RBI's previous meeting early December have shown further moderation in price pressures, though headline inflation remains well above the mid-point of the RBI's target range of 2.0 percent to 6.0 percent. Inflation fell from 6.77 percent in October to 5.88 percent in November and 5.72 percent in December, with January data scheduled for release next week. In the statement accompanying today's decision, RBI officials note that the recent fall in inflation mainly reflects vegetable prices, with core inflation pressures remaining high. They forecast headline inflation will remain between 5.0 percent and 6.0 percent for the rest of the current fiscal year and throughout the next fiscal year, with risks to this forecast considered to be evenly balanced. Officials, meanwhile, expect domestic economic activity to"remain resilient", supported by fiscal policy and solid consumer and business sentiment.

Reflecting this assessment, officials have decided that"further calibrated monetary policy action is warranted" to"break core inflation persistence". They also judge that this action will support medium-term growth prospects. Officials again promised to"remain focused" on withdrawing policy accommodation, suggesting they consider further rate increases will likely be warranted in upcoming meetings.

In 2022, the Reserve Bank of India raised its benchmark repurchase rate by a total of 225 basis points and by 35 basis points at its last meeting in December. With inflation still running above target, at 5.72 percent in December, forecasters expect the bank to raise the rate by another 25 points at its February meeting.

The Reserve Bank of India (RBI) issues six Bi-monthly Policy Statements a year. During these announcements the RBI will signal any shifts in its monetary stance, particularly with reference to the benchmark repo interest rate and its cash reserve ratio (CRR). The Governor will also update the Bank's view of recent economic developments and provide new forecasts for inflation and growth. A 4 percent inflation target with a +/- 2 percentage point tolerance band was formally implemented in August 2016 and will be overseen by a new six-member Monetary Policy Committee (MPC).

Although the RBI monitors many economic indicators - as indeed all central banks do - the RBI most closely monitors inflation. The level of interest rates affects the economy. Higher interest rates tend to slow economic activity while lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, fewer homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or for those who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the financial markets, while lower interest rates are bullish.

The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937. The Central Office is where the Governor sits and where policies are formulated. Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully owned by the Government of India. The Reserve Bank's affairs are governed by a central board of directors. The board is appointed by the Government of India in keeping with the Reserve Bank of India Act.

The Reserve Bank of India performs this function under the guidance of the Board for Financial Supervision (BFS). The Board was constituted in November 1994 as a committee of the Central Board of Directors of the Reserve Bank of India. Primary objective of BFS is to undertake consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies. Its function is to advise the Central Board on local matters and to represent territorial and economic interests of local cooperative and indigenous banks; to perform such other functions as delegated by Central Board from time to time. Primary objective of BFS is to undertake consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies. The Board is required to meet normally once every month. It considers inspection reports and other supervisory issues placed before it by the supervisory departments.