NEW DELHI (Commodity Online) : As expected, India’s central bank, Reserve Bank of India (RBI) on Thursday raised its key interest rates for the eighth time in a year.

The repo, the rate at which the RBI lends, was raised by 25 basis points to 6.75 percent from 6.50 percent and the reverse repo, the rate at which the central bank borrows from banks, to 5.75 percent from 5.50 percent with immediate effect.

The cash reserve ratio, the portion of deposits banks need to park with the central bank, has been left unchanged at 6 percent.

Home and auto loans may cost more as the RBI raised its short-term lending and borrowing rates by 25 basis points each yet again on Thursday with a view to check spiralling prices of essential commodities.

This is the eighth time since March 2010 the RBI has resorted to policy rate hike to tackle inflation, which is ruling above 8 per cent, much above the comfort level of 5-6 per cent.

In view of the rising fuel prices, following unrest in the middle-East and high food prices in the domestic market, the RBI has upped its March end inflation forecast to 8 per cent from 7 per cent projected earlier.

The short-term lending (repo) rate has been hiked to 6.75 per cent and the short-term borrowing (reverse repo) rate to 5.75 per cent with immediate effect.

While the RBI injects liquidity through repo rate, it absorbs funds through reverse repo window.

The latest policy action is expected to continue to rein in demand-side inflationary pressures while minimizing risks to growth and manage inflationary expectations, the bank led by Governor Duvvuri Subbarao said in its mid-quarter review of monetary policy.

The RBI also raised its forecast for March wholesale price inflation to around 8 percent from 7 percent. WPI inflation rose to 8.31 percent in February from 8.23 percent a month ago.

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