India's central bank, Reserve Bank of India (RBI) raised interest rates last major for the fourth time this year. Such efforts were carried out as a new venture by the banking regulatory authority of India to tame inflation the highest among the G20 group. As quoted from the AFP on Tuesday (27/07/2010), according to the RBI Governor D Subbarao reported annual interest rate rise in the level of 10.55 percent in June, well above the central bank's desired level of 5.5 percent.
This step, he explained, was the second increase this month is designed to tackle inflation at its highest level is driven by high food prices as well. In addition, wages are moving fluctuations and economic growth estimated at 8.5 percent this year. RBI chose to increase interest rates by 25 basis points (bsp) to 5.75 percent and expected that policy can influence the level of percentage of commercial bank lending imposed, and increased the reverse repo 50 bsp for banking there, especially to raise deposit rates.
India's inflation rate had been below one percent during the past nine months. This gives room for banks to cut interest rates and bolster economic growth.
"The inflation rate is now low enough and the government will try to roll another fiscal stimulus," said the RPG Foundation president DH Pai Panandiker. According to him, the central bank will probably be run out of cycle interest rate cuts. Central Bank of India has slashed interest rates six times in seven months. Benchmark interest rate is currently 3.25 percent. The central bank is very careful in cutting interest rates further as consumer prices in India rose and gave the signal domestic demand began to squirm
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