The IMF today welcomed as an appropriate step the decision of the Reserve Bank of India (RBI) to increase the repo rate by 25 basis point to 6.25 per cent amid rising inflation and additional upside risks due to higher oil prices.

In its second bi-monthly monetary policy of the current fiscal, the Reserve Bank of India on Wednesday hiked the key short-term lending rate by 0.25 per cent after a gap of about four and half years. The current repo rate stands at 6.25 per cent.

“We welcome the Reserve Bank of India’s decision to increase the policy rate by 25 basis points,” International Monetary Fund Spokesman Gerry Rice told reporters during his bi-weekly news conference here.

In the context of rising inflation and additional upside risks due to higher oil prices, exchange rate depreciation and other domestic factors, the IMF thinks that this was an appropriate step by the RBI, Rice said.

He was responding to a question on the decision of the RBI to increase the interest rate for the first time in the last four years.

It was in January 2014 that the RBI had increased the repo rate to eight per cent to keep the inflation under check