admininflation, despite signs of slowing economic growth.
The Reserve Bank of India (RBI) raised its repo rate, at which it lends to commercial banks, by a quarter percentage point to 8,25 percent and increased the reverse repo – the rate it pays to banks for deposits – to 7,25 percent.
RBI governor Duvvuri Subbarao said the move was necessary because inflation remained high and well above the bank’s “comfort zone” of around five percent.
India’s benchmark wholesale price index – the closest watched cost-of-living monitor – hit a 13-month peak of 9,78 percent in August.
Overall, India’s inflation is the highest of any large global economy.
The monetary tightening lifted the repo rate to a near three-year peak and the reverse repo to its highest in over a decade.
Subbarao said it was “imperative to persist with the current anti-inflationary stance”, adding future rate decisions will be based on “signs of downward movement in the inflation trajectory”.
“A premature change in the policy stance could harden inflationary expectations, thereby diluting the impact of past policy actions,” he said in a statement after a meeting of policymakers in Mumbai. – AFP.
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