India Monetary Policy


Central Bank raises interest rates further

At its policy meeting on 16 June, the Reserve Bank of India (RBI) raised interest rates by 25 basis points, which drove the repo rate to 7.50%. The decision was widely expected by market analysts and represents the continuation of the tightening cycle that began in March 2010, when the RBI first increased the repo rate from a record-low of 4.75%. In its press release, the RBI acknowledged that growth in both the domestic sector and abroad is decelerating. However, the Bank confirmed that ?inflation remains high and much above the comfort zone? despite the recent ?moderation in commodity prices?. In this context, the RBI reaffirmed that its ?monetary policy stance remains firmly anti-inflationary, recognising that, in the current circumstances, some short-run deceleration in growth may be unavoidable in bringing inflation under control.?


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