India Monetary Policy


Central Bank lifts rates by 25 basis points

At its 16 September policy meeting, the Reserve Bank of India (RBI) voted to raise interest rates by 25 basis points, bringing the repo rate to 8.25%. The move was broadly anticipated by the market and represented the 12th rate hike since the tightening cycle began in March 2010. The Bank stated that ?inflation remains high, generalised and much above the comfort zone of the Reserve Bank.? Consequently, with its latest move the RBI has reaffirmed its commitment to tame inflation even at the expense of slower growth. In that vein, the RBI stressed that ?developments in the global economy over the past few weeks are a matter of serious concern? and acknowledged that growth in the fiscal year 2011/12 may fall short of the projections made in July, owing to slower demand in developed economies and faltering domestic activity on which ?the monetary policy stance is also contributing?.


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