India’s central bank has raised its benchmark interest rate for the first time in nearly four years as policymakers move to contain renewed inflation pressure.
The Reserve Bank of India increased its repo rate by 25 basis points to 5.5 percent, Reuters reports.
The central bank also shifted its policy position toward what it described as calibrated tightening, leaving the door open to additional increases if inflation remains elevated.
Higher oil prices are particularly important for India because the country imports much of the energy it consumes.
Inflation is expected to remain under pressure in the coming quarters, although the Indian economy continues to expand at a relatively strong pace.
The RBI expects economic growth of around 7.1 percent for the fiscal year.
India’s decision places it among central banks responding cautiously to renewed inflation risks at a time when investors had hoped the global interest rate cycle was moving in the opposite direction.
For households and businesses, the decision could eventually mean more expensive borrowing.
