India's central bank raises policy rate, says inflation still bites
Business
India's central bank raises policy rate, says inflation still bites
(REUTERS) - The Reserve Bank of India s key repo rate was raised by 35 basis points (bps) on Wednesday as widely expected, the fifth straight increase, with the central bank vowing there will be no let up in its fight to tame high inflation.
The monetary policy committee (MPC), comprising three members from the RBI and three external members, raised the key lending rate or the repo rate to 6.25% in a majority decision. Five of the six members voted in favour of the increase.
A strong two-thirds majority in a Reuters analysts poll had predicted a 35 bps increase, smaller than its last three hikes of 50 bps each, and said it was still too soon for the central bank to take its eye off inflation, which has stayed above the upper end of the RBI s 2-6% tolerance band all year.
India s annual retail inflation eased to a three-month low of 6.77% in October, helped by a slower rise in food prices and a higher base effect, strengthening bets on smaller rate increases by the RBI going ahead.
Still, despite some signs of moderation, RBI Governor Shaktikanta Das said the main risk was that inflation could remain sticky and elevated.
"The MPC was of the view that further calibrated monetary policy action was warranted to keep inflation expectations anchored, break core inflation persistence and contain second round effects,” Das said as he announced the monetary policy committee s decision.
"The focus on inflation control continues. There will be no let up in our efforts to bring inflation to more manageable levels," he added.
