India’s Central Bank Raises Key Lending Rate to 6.25 Percent
India’s central bank raised its benchmark lending rate Wednesday to tamp down rising inflation following an increase in oil prices.
The increase of one-quarter percentage point to 6.25 percent is the first since January 2014 and comes at a time when consumer inflation is at a four-year high.
The Reserve Bank of India said it expects inflation of 4.8 to 4.9 percent in the first half of the 2018-19 financial year, which started April 1.
More rate hikes are likely in coming months, said Shilan Shah of Capital Economics in a report.
The bank said crude oil prices have been volatile, causing uncertainty to the inflation outlook. There was a 12 percent increase in the price of Indian crude basket, which was sharper than expected.
The bank forecast GDP growth for the 2018-19 financial year at 7.4 percent, up from the previous year’s 6.7 percent.
That increase has been underpinned by improved rural demand on the back of a bumper harvest and the government’s emphasis on rural housing and infrastructure.
The bank said the forecast of a normal June-September monsoon is a good sign for agricultural.