Econintersect: The Reserve Bank of India (RBI) has raised a key lending rate for the 13th time in the past 18 months. The rate at which RBI will lend to commercial banks was raised by 0.25% (25 basis points) to 8.5%. The expectation that this would occur was reported last week by Sanjeev Kulkarni in an article at GEI News. India and China have both been tightening monetary policy for an extended period as inflation has been a serious concern in both countries. There has also been concern that the aggressive moves to rein in inflation could bring what have been high economic growth rates down significantly.Of the two countries (India and China), though, India has been experiencing the more stubborn inflation (near 10% vs. China’s 6% range) and is also experiencing the larger reduction in growth (GDP growth 7.7% last quarter vs. China’s 9.1%).
Other leading developing countries have been cutting rates recently in anticipation of a global slowdown. The Financial Times specifically mentions rate cuts in Brazil, Turkey and Indonesia.