INDIA’S reserve bank raised the repo rate at which it lends to banks by 0.25 per cent to 6.5 per cent yesterday, in a bid to clamp down on resurgent inflation.
The central bank also raised its inflation forecast for the end of the fiscal year in March to seven per cent from 5.5 per cent. Markets reacted to the inflation forecast, which could be read as a hint towards more interest rate hikes. The Bombay stock exchange’s Sensitive Index (Sensex) closed 0.95 per cent down at 18,969.45 points. The increase in key rates was the seventh since March.