India Hikes Interest Rate 25 Basis Points for First Time in Four Years
India's central bank raised its benchmark repo rate by 25 basis points to 5.5 per cent, the first hike in nearly four years, and shifted its policy stance to 'gradual tightening' as inflation stayed above target.
India's central bank on Wednesday raised its benchmark repurchase rate by 25 basis points to 5.5 per cent, marking the first rate increase in nearly four years, in line with market expectations.
The Monetary Policy Committee also shifted its policy stance from 'neutral' to 'gradual tightening', signalling a more hawkish approach to managing inflation.
India's annual consumer inflation rate rose to 4.82 per cent in August, remaining above the central bank's medium-term target of 4 per cent for the third consecutive month. Price increases in fuel and food are gradually transmitting through the broader economy, with nearly half of the items in the consumer price basket now recording inflation above 4 per cent.
The economy grew 7.8 per cent in the second quarter of this year, significantly higher than the central bank's earlier forecast of 7 per cent. The strong economic expansion gave policymakers greater room to raise rates without choking growth.