India’s central bank unexpectedly hiked key interest rates by a quarter of a percentage point, as it tries to cool high inflation amid a faster-than-expected economic rebound.
The bank raised the benchmark repo rate – at which the central bank makes short-term loans to commercial banks – to 5% and raised the reverse repurchase rate – the rate at which it borrows from commercial banks – to 3. %, with immediate effect.
The Reserve Bank of India said in a statement after trading hours last night: “These measures should anchor inflationary expectations and contain inflation going forward. As liquidity in the banking system will remain adequate, credit expansion for sustaining the recovery will not be affected.”