In a bid to tame rising prices which have pushed the annual inflation rate beyond 8 per cent, the Reserve Bank of India on Wednesday raised the repo rate by 25 basis points to 8 per cent from existing 7.75 per cent.
The apex bank's move comes on the back of Prime minister Manmohan Singh's statement that both administrative and fiscal measures will be taken to contain inflation.
In fact, the inflation rate has shot up by at least 80 basis point following the steep hike in the prices of petroleum products announced on June 4.
The apex bank in a statement said it had addressed the "unprecedented uncertainties and dilemmas that exist".
It said: "Monetary policy has to respond proactively to immediate concerns. At the same time, it is critical at this juncture to demonstrate on a continuing basis a determination to act decisively, effectively and swiftly to curb any signs of adverse developments in regard to inflation expectations."
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