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RBI shocks with rate rise

  • In its first decision under new governor Raghuram Rajan, the Reserve Bank of India has surprisingly increased its benchmark lending rate to 7.5% from 7.25%, saying that "bringing down inflation to more tolerable levels" warranted increasing the LAF repo rate.
  • Analysts had expected the RBI to leave the rate as it was.
  • The central bank also started to reverse recent measures it took to calm volatility in the forex market, lowering the marginal standing facility rate by 75 bps to 9.5%.
  • The RBI's actions rocks shares, with the Sensex -2.5% after being -0.2% prior to the decision. The rupee plunges briefly before stabilizing somewhat and the USD-INR is now +0.3% at 62.38 (PR)
  • ETFs - Stocks: INDY, EPI, PIN, INP, INDA, INXX, SCIF, SCIN, INDL, SMIN. Currency: ICN, INR
Comments (1)
  • keentolearn
    , contributor
    Comments (129) | Send Message
     
    Governor Raghuram Rajan don't have much room to move as the state of politics is very rigid. Raising benchmark rates wont do much to tame inflation.
    2 Oct 2013, 11:55 AM Reply Like
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