India’s central bank on Thursday raised its key interest rate to 7.50 percent from 7.25 percent, as most observers predicted earlier this week, the Associated Press reports.
The 10th hike in just over a year, the bank's move to rein in galloping inflation may well be futile as long as the government keeps other measures in place to stimulate growth.
Consequent to the increase in the short-term lending rate — or repo rate— the reverse repo rate will stand automatically adjusted to 6.5 percent, the Reserve Bank of India said in a statement. India suffers from the worst inflation of any major Asian economy, according to AP.
In the current circumstances, some short-run deceleration in growth may be unavoidable in bringing inflation under control, the bank said.
The bank said the gross domestic product growth slowed to 7.8 percent in the fourth quarter of 2010-11 from 8.3 percent in the previous quarter and 9.4 percent in the corresponding quarter a year ago. GDP growth for fiscal year ending March 2011 was 8.5 percent.