RBI shocks with rate rise

|By:, SA News Editor

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)

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