By FxNewsIndia – The Reserve Bank of India today raised their lending and borrowing interest rates by 25 basis points in a bid to contain inflationary pressures in the Indian economy. The rate increase brought the bank’s lending repo rate to 6.25 percent and the reverse repo rate to 5.25 percent while leaving the cash reserve ratio unchanged at 6 percent. Today’s rate decision was widely expected by market forecasters and marks the sixth time this year that the bank has increased their rates.
Central Bank governor Dr. D. Subbarao said in the bank statement announcing the policy decision that inflation was “well above the comfort zone of the Reserve Bank” and “significantly above its medium-term trend”.
The bank statement characterized the move as being “moderate enough not to disrupt growth”and targeted to contain the rising inflationary expectations which “may be aggravated by the structural nature of food price increases”.
Governor Subbarao also highlighted that growth in the Indian economy “is operating close to the trend growth rate” and the “baseline projection of real GDP growth for 2010-11, for policy purposes, is retained at 8.5 per cent”.
Despite a global economic outlook that is “fragile and uneven”, the RBI believes that “domestic growth drivers are robust which should help absorb to a large extent the negative impact of any slowdown in global recovery.”
