The Reserve Bank of India on Thursday decided to lift its key policy rates by 25 basis points to combat rising inflation.

The repo, the rate at which the RBI lends, was raised by a quarter point to 7.5 percent. The reverse repo, the rate at which the central bank borrows from banks, was lifted to 6.5 percent from 6.25 percent.

The last central bank move was in May, when it lifted the rates by 50 basis points.

The latest policy action is expected to contain inflation and anchor inflationary expectations by reining in demand side pressures. It will also mitigate the risk to growth from potentially adverse global developments.

"Based on the current and evolving growth and inflation scenario, the Reserve Bank will need to persist with its anti-inflationary stance of monetary policy," the bank said in Mid-Quarter Monetary Policy Review.

Domestic inflation remains high and well above the comfort zone. "While the Reserve Bank needs to continue with its anti-inflationary stance, the extent of policy action needs to balance the adverse movements in inflation with recent global developments and their likely impact on the domestic growth trajectory," the bank added.

RTTNews