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Strategies & Market Trends : India Stocks

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From: Julius Wong	1/25/2011 8:19:51 AM
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India Raises Benchmark Interest Rate to Two-Year High to Slow Inflation By Kartik Goyal - Jan 25, 2011 India’s central bank raised the benchmark interest rate to a two-year high and signaled further increases in borrowing costs as it boosted the country’s inflation forecast. Stocks fell. Governor Duvvuri Subbarao lifted the repurchase rate to 6.5 percent from 6.25 percent, according to a statement from the Reserve Bank of India in Mumbai today. The decision was forecast by 21 of 22 economists in a Bloomberg News survey. One expected a half-point advance. Subbarao increased the reverse repurchase rate to 5.5 percent from 5.25 percent. India joins South Korea and Thailand in raising rates this month after increasing them six times in 2010, the most by any central bank in Asia. The move will buttress government efforts to cool inflation after Prime Minister Manmohan Singh unveiled plans to reduce food prices by importing onions from Pakistan and keeping a ban on exports of lentils and edible oils. “Inflation is becoming an increasingly huge worry at this point in time and the RBI will need to do a major part of the firefighting in containing inflation,” said Leif Eskesen, a Singapore-based economist at HSBC Holdings Plc. “The monetary policy needs to be much tighter than it’s now, given the building up of inflationary pressures.” Read more bloomberg.com

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