India's central bank raises key lending rate to 6.25 percent

June 06, 2018 - 6:57 am
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NEW DELHI (AP) — India's central bank raised its benchmark lending rate Wednesday to tamp down rising inflation following an increase in oil prices.

The increase of one-quarter percentage point to 6.25 percent is the first since January 2014 and comes at a time when consumer inflation is at a four-year high.

The Reserve Bank of India said it expects inflation of 4.8 to 4.9 percent in the first half of the 2018-19 financial year, which started April 1.

More rate hikes are likely in coming months, said Shilan Shah of Capital Economics in a report.

The bank said crude oil prices have been volatile, causing uncertainty to the inflation outlook. There was a 12 percent increase in the price of Indian crude basket, which was sharper than expected.

The bank forecast GDP growth for the 2018-19 financial year at 7.4 percent, up from the previous year's 6.7 percent.

That increase has been underpinned by improved rural demand on the back of a bumper harvest and the government's emphasis on rural housing and infrastructure.

The bank said the forecast of a normal June-September monsoon is a good sign for agricultural.

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