The Reserve Bank of India’s decision to double the magnitude of interest-rate increases signals it is ready to step up the battle against inflation even at the risk of damping the nation’s economic growth.
India’s central bank refrained from raising interest rates for the first time in eight meetings as inflation cools and the fallout from Europe’s debt crisis threatens growth. Ten-year bonds gained the most in six months.
After a brief lull, the strain in the fractious relationship between India’s Finance Ministry and its central bank, the Reserve Bank of India, is back. India’s annual budget ritual last month, in which Finance Minister Palaniappan Chidambaram presented the country’s economic and fiscal policy, provided a brief respite.