India Raises Rates, Breaks Ranks With BRICs
By Kartik Goyal - Sep 16, 2011
India’s central bank raised interest rates for the 12th time since the start of March 2010, breaking ranks among the so-called BRIC nations that have either cut or held borrowing costs as the global recovery falters.
The Reserve Bank of India increased the repurchase rate to 8.25 percent from 8 percent, it said in a statement today. Fourteen of 17 economists in a Bloomberg News survey predicted the decision and three expected no change.
Governor Duvvuri Subbarao’s move contrasts with Brazil and Russia, which cut borrowing costs in the past month, while China has paused rate increases since early July. Higher food and fuel prices and weakness in the rupee may keep inflation above 9 percent, a level exceeded in each of the last nine months.
“The decision clearly points out that the RBI’s top priority is curbing inflation despite concerns about global turmoil,” said Indranil Sen Gupta, Mumbai-based emerging Asiaeconomist at Bank of America Corp. “There will be pressure on inflation after last evening’s petrol-price increases and the rupee’s depreciation.”
The yield on the 7.8 percent bond due April 2021 rose 1 basis point, or 0.01 percentage point, to 8.34 percent at 12:44 p.m. in Mumbai. The Bombay Stock Exchange Sensitive Index gained 1 percent. The rupee advanced 0.1 percent to 47.50 per dollar.
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