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India Hikes Interest Rate to Slow Inflation
India's central bank has raised its commercial loan rate one-quarter percentage point to 7.5% in an effort to curb the country's inflation rate, which hit a six-month high of 6.1% this week.
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India's central bank has raised its commercial loan rate one-quarter percentage point to 7.5% in an effort to curb the country's inflation rate, which hit a six-month high of 6.1% this week.
The hike by the Reserve Bank of India and its new governor, Raghuram Rajan, surprised the country's financial community. But he has made it clear since taking over on Sept. 4 that some of his actions would not be popular.
The increase came a day after the State Bank of India hiked its lending rate for new borrowers by 10 basis points to 9.8%. The increase does not apply to existing borrowers.
India's business community and central government had hoped for a rate cut from the RBI to help stimulate the economy. But Rajan's action makes it clear that the bank considers inflation a bigger worry.
So far this month India's rupee has zoomed from a record low 68.85 against the U.S. dollar to about 62.50 today, making it one of Asia's strongest performers.
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