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Friday 28th of January 2011
January 25, 2011    

Reserve Bank of India in further interest rate hikes

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by Kay Murchie
Reserve Bank of India in further interest rate hikes

The Reserve Bank of India (RBI) has today raised key interest rates for the seventh time in less than a year, in a bid to tame stubbornly high inflation in a thriving economy.

The move, which was widely expected, saw the central bank raise its repo rate, at which it lends to banks, to 6.5% from 6.25% and its reverse repo rate, at which it borrows from banks, from 5.25% to 5.5%.

The Indian economy, which is the world’s second fastest-growing major economy behind China, grew by a staggering 8.9% on an annual basis in the July to September period.

Its growth has been fuelled by manufacturing, services and a strong farm sector.

However, the economy faces headwinds – the country’s inflation rate is the highest among the Group of 20 leading nations, due to soaring food costs.

The RBI has previously said one of its main priorities is to bring down inflation and it is forecasting it to fall to 5.5% by the end of the financial year in March.

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

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Tags: , fastest growing, headwinds, , , , , repo, , thriving

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