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Reserve Bank of India raises key interest rate

Reserve Bank of India has raised its key interest rate by half a percentage point Tuesday, the 11th hike in less than a year and a half, as it warned that inflation remains the country’s main economic concern.

The bank raised its short-term lending rate from 7.5 per cent to 8 per cent, a higher increase than expected after inflation rose to 9.4 per cent in June from 9.1 per cent in May.

“Inflation continues to be the dominant macroeconomic concern,” said Reserve Bank of India Governor Duvvuri Subbarao,

“Going forward, the monetary policy stance will depend on the evolving inflation trajectory.” The half-point rake hike was seen as a sign that the Reserve Bank of India is willing to sacrifice short-term growth to control inflation, which despite the bank’s actions is still worse in India than in any other major Asian economy.


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