India’s central bank raises key rates
(18 March 2010 – India) India's central bank has hiked two key interest rates by a quarter-percentage point each.
The move continues the central bank’s tightening measures as the fight against inflation trumps concerns of a global slowdown in growth after the Japan earthquake.
The rate rises come after a key inflation reading was higher than expected in February, surprising policy makers who had watched food inflation taper off for five consecutive weeks.
The Reserve Bank of India raised the repurchase rate, its key lending rate, to 6.75 percent, and the reverse repurchase rate, its key borrowing rate, to 5.75 percent.
The rate rises are expected to 'continue to rein in demand-side inflationary pressures while minimising risks to growth, and manage inflationary expectations and contain the spill over of food and commodity prices into more generalised inflation,' the RBI said.
Finance Minister Pranab Mukherjee said he expects the increases to have a 'salutary effect' on inflationary pressures.
'It is in tandem with fiscal policy and thinking of the government,' said Mr Mukherjee, who recently lowered the government's deficit target for next fiscal year to 4.6 percent of GDP, from 4.8 percent previously.
The rate rises come after a key inflation reading was higher than expected in February, surprising policy makers who had watched food inflation taper off for five consecutive weeks.
The Reserve Bank of India raised the repurchase rate, its key lending rate, to 6.75 percent, and the reverse repurchase rate, its key borrowing rate, to 5.75 percent.
The rate rises are expected to 'continue to rein in demand-side inflationary pressures while minimising risks to growth, and manage inflationary expectations and contain the spill over of food and commodity prices into more generalised inflation,' the RBI said.
Finance Minister Pranab Mukherjee said he expects the increases to have a 'salutary effect' on inflationary pressures.
'It is in tandem with fiscal policy and thinking of the government,' said Mr Mukherjee, who recently lowered the government's deficit target for next fiscal year to 4.6 percent of GDP, from 4.8 percent previously.
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