The Reserve Bank of India has unexpectedly increased its key policy repo rate by 25 bps to 8%, citing projections that CPI will remain high. Inflation was 9.9% in December.
However, the RBI said that if inflation eases as expected, it doesn't believe it will need to tighten further.
The focus on CPI indicates that the RBI could adopt a proposal to set an inflation target.
The Sensex is -0.4%, while the USD-INR is -0.8% at 62.92 rupees. (PR)