RBI raises repo rate by 25bps to 5.5%

The Reserve Bank of India has increased its key policy rate, the repo, by 25 basis points to 5.50%, Mettis Link News reported. The six-member Monetary Policy Committee approved the move unanimously, and it ends a stretch of more than three years without an increase. Until now the central bank had kept rates unchanged for months while assessing how volatile crude prices could affect India's fast-growing economy.

The economy expanded strongly in the most recent quarter, which gave the bank space to turn toward prices. Much of the country's energy is brought in from abroad, and a feeble monsoon has increased the chance of costlier food. Retail inflation rose to 4.82% in August, marking a third month running above the central bank's 4% medium-term goal, and price rises were extending past food and transport.

The rupee also came under pressure, trading close to record lows during the last seven days. The central bank introduced a set of steps to attract dollars, among them a deposit programme aimed at non-resident Indians, which gathered around $127bn. Those steps stopped the currency's fall, yet renewed pressure has returned as overseas investors keep offloading Indian shares, with crude near $100 a barrel.