Mumbai: India's central bank raised interest rates for a sixth time this year in Asia's fastest round of increases and said the chance of further policy tightening in the "immediate future is relatively low."
The Reserve Bank of India boosted the repurchase rate by a quarter-point to 6.25 per cent and the reverse repurchase rate by a similar margin to 5.25 per cent with immediate effect, according to a statement in Mumbai.
Fifteen of 23 economists had predicted the decision in a Bloomberg News survey.
Governor Duvvuri Subbarao's move comes as counterparts in nations from Japan to the US are considering additional monetary stimulus, increasing the risk of an influx of capital into India that might exacerbate inflation.
Bonds
The yield advantage of Indian 10-year government bonds over similar maturities of US Treasuries is hovering near a decade high.
"Today's rate increase is aimed at making sure that inflation doesn't get out of hand," said Jay Shankar, chief economist at Religare Capital Markets in Mumbai. At the same time, "it'll further add to higher inflows" of capital from overseas, he said.
The rupee gained 0.2 per cent to 44.41 per dollar as of 4.16pm in Mumbai, while the Bombay Stock Exchange's Sensitive Index was little changed at 20,345.
Eight analysts had forecast no change in the repurchase rate in the Bloomberg survey before yesterday's decision. One expected a half-point increase in the reverse repurchase rate while the remaining seven said it may be kept on hold.
