MUMBAI (AFP) – India’s central bank raised interest rates for the first time in over four years yesterday, highlighting concerns over rising inflation.
The Reserve Bank of India (RBI) said the benchmark repo rate – the level at which it lends to commercial banks – would be increased by 25 basis points to 6.25 percent.
The rate was last hiked in January 2014 when it hit 8.0 percent before a series of cuts.
Retail inflation in India recently touched 4.58 percent, above the target set by the RBI’s monetary policy committee (MPC).
It is being stoked by rising oil prices and increased consumer spending as India’s economy turns a corner following a number of disruptive measures.
A predicted normal monsoon is also expected to sustain the Indian economy’s growth – for which agriculture is a cornerstone – over coming months.
“Against the above backdrop, the MPC decided to increase the policy repo rate by 25 basis points and keep the stance neutral,” said a bank statement.
“The MPC reiterates its commitment to achieving the medium-term target for headline inflation of four per cent on a durable basis,” it added following its meeting in the financial capital Mumbai.
