India key rates up, again
MUMBAI: India's central bank raised its policy interest rate for the second time in as many months yesterday, warning that inflation is likely to remain elevated for the rest of the fiscal year, and rolled back an emergency measure put in place in July to support the slumping rupee.
The Reserve Bank of India (RBI) lifted its policy repo rate by 25 basis points (bps) to 7.75 per cent, in line with the expectations of most analysts in a recent poll, despite the risks to an economy beset by sluggish growth.
"Overall WPI (wholesale price index) inflation is expected to remain higher than current levels through most of the remaining part of the year, warranting an appropriate policy response," RBI governor Raghuram Rajan said in his review.
With the rupee having stabilised, the RBI lowered its Marginal Standing Facility (MSF) rate a further 25 bps to 8.75 per cent, which eases liquidity in the banking system by lowering the cost of borrowing for lenders.
Rajan, a high-profile former chief economist at the International Monetary Fund, took office in early September and stunned markets in his first policy review just weeks later by raising interest rates to combat fierce price pressures dogging Asia's third-largest economy. Reuters