Indian Central Bank Raises Interest Rates And Cuts GDP Growth Forecast

Indian rupee

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The Reserve Bank of India (RBI) boosted its benchmark repo rate by 25 basis points to 8.5%.  The move was in line with expectations.This comes as the country battles to contain inflation.  For now the RBI’s inflation forecasts are unchanged.  From their press release:

As in the past, we have also given guidance for the period forward. The projected inflation trajectory indicates that the rate will begin falling in December 2011 and then continue down a steady path to 7 per cent by March 2012. It is expected to moderate further in the first half of 2012-13.

However, they cut India’s GDP growth forecast:

In its May Statement and the July Quarterly Review, the Reserve Bank projected GDP growth of 8.0 per cent for 2011-12. The mid-quarter review of September, however, pointed out that the risk to the growth projection was on the downside.

Based on the current and evolving macroeconomic situation, we have revised downwards the baseline projection of GDP growth for 2011-12 to 7.6 per cent.

The full press release is available the Reserve Bank of India’s website.

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