India hikes rate to fight inflation
(20 September 2010 – India) India's central bank raised its main interest rates more than expected on Thursday, springing the fifth hike in six months to tame inflation in Asia's third-biggest economy.
The Reserve Bank of India (RBI) raised its main repo rate, the rate at which it lends to commercial banks, by 25 basis points to 6.0 percent, a move that was in line with analysts' forecasts.
But it hiked the reverse repo rate, the rate it pays to banks for deposits, more aggressively than forecast, increasing it by 50 basis points to 5.0 percent.
Inflation remains the dominant concern in macroeconomic management, the bank said in a statement.
Inflation dipped to a seven-month low in August, but is still seen as too high.
Though inflation rates have reached a plateau, they are likely to remain at unacceptably high levels for some months, the bank added.
The measures undertaken should help contain inflation without disrupting the country's economic growth, the bank said.
The wholesale price index, the government's preferred main inflation indicator, dropped to 8.51 percent year-on-year in August, from 9.78 percent the previous month, official figures showed.
India's Congress-led government has been under intense pressure over high prices that have made life even more difficult for the country's hundreds of millions of poor.
Food inflation is still contributing to inflation pressures, but about two-thirds of inflation in August can be attributed to items beyond food, the statement said.
But it hiked the reverse repo rate, the rate it pays to banks for deposits, more aggressively than forecast, increasing it by 50 basis points to 5.0 percent.
Inflation remains the dominant concern in macroeconomic management, the bank said in a statement.
Inflation dipped to a seven-month low in August, but is still seen as too high.
Though inflation rates have reached a plateau, they are likely to remain at unacceptably high levels for some months, the bank added.
The measures undertaken should help contain inflation without disrupting the country's economic growth, the bank said.
The wholesale price index, the government's preferred main inflation indicator, dropped to 8.51 percent year-on-year in August, from 9.78 percent the previous month, official figures showed.
India's Congress-led government has been under intense pressure over high prices that have made life even more difficult for the country's hundreds of millions of poor.
Food inflation is still contributing to inflation pressures, but about two-thirds of inflation in August can be attributed to items beyond food, the statement said.
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