India’s central bank has continued its fight against persistently high inflation by raising two key interest rates even in the face of a global slowdown on the disaster in Japan, according to The Wall Street Journal. On Thursday, the Reserve Bank of India voted to raise its key lending-rate by a quarter point, moving the repurchase rate to 6.75%, while moving the borrowing rate up by the same amount, marking a 5.75% level for the reverse repurchase rate. The move is the eighth rate hike since March 2010.
Inflation in India outpaced expectations in February, prompting further tightening by policymakers, who have also raised the repo rate by 2%, increased the reverse repo rate by 2.5%, and boosted the cash reserve ratio by 100 basis points in the last year. The RBI maintained the 8.5% growth forecast for the fiscal year ending Mar. 31, but warned, “Continuing uncertainty about energy and commodity prices my vitiate the investment climate, posing a threat to the current growth trajectory.” Economists are expecting to see further rate hikes in the coming months, despite the bank’s warning.
