The Reserve Bank of India Tuesday announced a hike in its key interest rates in a move to tame prices that are currently hovering around thirteen-year highs and said it aims to pull it down to levels close to 7.0 percent by March 2009.

In its quarterly monetary policy review, the central bank raised its key repo rate, the rate at which it lends money to banks, by 50 basis points to 9 percent with immediate effect.

It said it will increase the statutory cash reserve ratio — the level of mandated reserves to be maintained by banks — by 25 basis points to 9 percent from Aug. 30.

The RBI also revised down its GDP growth projection for fiscal 2008-09 to 8.0 percent from a band of 8.0 percent to 8.5 percent.

India’s wholesale price index-based inflation came in at 11.89 percent for the week to July 12, more than double the central bank’s target of 4.5 percent to 5.0 percent.

The stock market dropped about 4 percent on the news, with financials hit hardest.

Source: http://www.afxnews.com

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