Reserve Bank of India Hikes Rate for 2nd Meeting in a Row

India’s central bank has served up its second consecutive interest rate hike, and there could be more to come.

The Reserve Bank of India raised the rate at which it lends to banks from 6.25% to 6.5% on Wednesday, after hiking it for the first time in four years in June.



India is growing faster than any other major economy but price rises are accelerating, and the stronger dollar isn’t helping.

Overall inflation rate rose from 4.5% to 4.6% between May and June, while retail inflation edged up to 5% — significantly higher than the bank’s 4% target.

The country relies on energy imports, and while oil prices have fallen in recent weeks, the rupee recently hit an all-time low against the US dollar. That pushes up the price of imported goods, fueling inflation.

“India’s external economic conditions remain vulnerable,” Kunal Kundu, an economist at Societe Generale, wrote in a note earlier this week. “Global rates are hardening, especially in the US,” he added.

via CNN

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza