Reserve Bank of India Governor Raghuram Rajan today hiked the key repo rate by 0.25 per cent to 7.5 per cent. The repo rate is the rate at which banks borrow short term money from the RBI. The Central bank's move to hike rates is aimed at reining in the rising inflation.

In its mid-quarter review of monetary policy for 2013-14, the RBI decreased the marginal standing facility, MSF, by 0.75 per cent to 9.5 per cent with immediate effect. It has also reduced minimum daily maintenance of the Cash Reserve Ratio, CRR, from 99 per cent of the requirement to 95 per cent, effective from the fortnight beginning 21 September 2013. The RBI has, however, kept the CRR unchanged at 4 per cent. The CRR is the amount of money banks have to park with the Reserve Bank.

The RBI also stated that WPI inflation, which had eased in the first quarter of 2013-14, has started rising again and it will be higher than initially projected over the rest of the year. Today’s monetary policy review is the first monetary policy of RBI Governor Raghuram Rajan.