RBI likely to raise key rates to control inflation

Tuesday, July 26, 2011: India’s central bank is expected to hike interest rates for the 11th time in less than a year and a half on Tuesday as it opts to continue to fight inflation despite warnings from business leaders.

Economists forecast that policy makers at the Reserve Bank of India (RBI) will raise short-term interest rates by 25 basis points when they announce a decision in the financial capital Mumbai at 11:00am.

The benchmark repurchase or repo rate, at which the RBI lends to commercial banks, is currently at 7.50 percent while the reverse repo, paid to banks for deposits, is 6.5 percent. The repo is now at its highest since November 2008 while the reverse repo is at a peak not seen for more than five years.