India lifts interest rates further to combat inflation

| June 16, 2011 | 0 Comments

The Reserve Bank of India (RBI) has today raised key interest rates for the tenth time since March 2010, in a bid to tame stubbornly high inflation in a thriving economy.

The central bank raised its repo rate, at which it lends to banks, to 7.25%, and its reverse repo rate, at which it borrows from banks, to 6.5%.

Analysts believe further rate hikes are expected in the short-term.

In a statement, the central bank said: “Inflationary pressures, primarily from commodity prices, have increased.

“Going forward, notwithstanding both signs of moderation in commodity prices and some deceleration in growth, domestic inflation risks remain high,” it added.

Consumer prices in India rose by a faster-than-expected 9.06% last month – the highest among the Group of 20 leading nations - as food and fuel costs continued to surge.

Annual food inflation has surged, causing major problems for the 450 million people who live below the poverty line in the country.

Prime Minister Manmohan Singh has said inflation is a “serious threat” to the country’s growth.

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