INSUBCONTINENT EXCLUSIVE:
Growing inflation concerns prompted the
Reserve Bank of India (RBI) to raise its policy rate for the first time in over four years on Wednesday, but it surprised some economists by
keeping its stance "neutral" instead of changing to "tighten"
The central bank's Monetary Policy Committee (MPC) lifted the repo rate by 25 basis points to 6.25 percent - the first rate change since a
respond to the risks to (the) inflation target that have emerged in recent months," RBI Governor Urjit Patel told reporters.Inflation
worries have risen due to a steep spike in global oil prices and a weakening rupee, plus a potential rise in consumer spending as India's
we think today's hike marks the start of a modest tightening cycle," said Shilan Shah, the senior India economist at Capital
Economics.Following the rate decision, 10-year benchmark bond yields rose to 7.93 percent - the highest levels since May 17 - from 7.83
percent before the policy statement
The rupee rose to 66.95 to the dollar from 67.05 prior to the announcement
Benchmark index Sensex added to its gains on Wednesday, as shares of state-run lenders rose after the RBI extended a move to let them spread
their bond trading losses, which should ease pressure on those laden with bad debt.The benchmark index, up 0.6 percent before the RBI
statement, ended 0.9 percent ahead.The RBI on Wednesday raised its inflation projection for the second-half of fiscal 2018-19, which ends in
March 2019, to 4.7 percent from the 4.4 percent seen earlier."If the current trend of increasing inflation and oil prices continues, we
expect another 25 bps hike somewhere during this fiscal year," said Sudhakar Pattabiraman, head of research operations at research firm
William O'Neil.Wednesday's rate increase, the first since January 2014, was predicted by 46 percent of respondents in a Reuters poll this
All six members on the policy panel voted for a rate hike
The reverse repo rate was increased by 25 basis points to 6.00 percent
Annual consumer inflation was 4.58 percent in April, the sixth straight month it topped the RBI's medium-term 4 percent target.The central
bank becomes the latest in Asia to increase rates recently, to battle inflationary pressures or support the domestic currency
In May, the Philippines and Indonesia lifted their benchmark rates for the first time since 2014
In March, China raised a key short-term rate following a Federal Reserve's rate hike.The repo rate increase comes one week before a Fed
policy meeting that's widely expected to raise U.S
