New Delhi: The Reserve Bank of India, in a rare move between scheduled monetary reviews, raised interest rates on Thursday by 25 basis points, as it battles accelerating inflation that could soon top 5 per cent.
Analysts had expected the Reserve Bank of India to raise rates at its next scheduled review on July 25, after the Government raised fuel prices this week.
A Government economic panel said the rate increase was not a surprise with inflation seen rising to between 5 and 5.5 per cent this year.
The central bank raised the reverse repurchase auction rate, its main monetary policy rate, by 25 basis points to 5.75 per cent.
It said in a statement it had also increased its repurchase auction rate by 25 basis points to 6.75 per cent, to maintain a 100 basis point spread.
The increase in rates comes just a few days after Government raised petrol prices by 9.2 per cent and diesel prices by 6.6 per cent, which boosted inflation expectations in the fast-growing economy, Asia's third largest.
The annual inflation rate for the week ended on May 20, based on wholesale prices, was at 4.74 per cent, up from 4.32 per cent a week earlier.
Economists said the fuel price increase would add 0.35 percentage points to inflation immediately. Financial markets were closed when the central bank made the announcement.
It last raised rates in January, also by 25 basis points. Indian bond yields were at four-year highs and stocks fell to their lowest in 20 weeks on Thursday, on growing expectations that borrowing costs both in India and abroad would keep rising.
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