Page last updated at 10:06 GMT, Tuesday, 29 January 2008

Indian interest rates unchanged

Indian Rupee
The Reserve Bank of India is monitoring the strength of the rupee

India's central bank has kept interest rates on hold at 7.75%, disappointing those who were hoping for a cut.

Economists said that rising food and fuel prices were more worrying for the Reserve Bank of India (RBI) than the impact of the sub-prime crisis.

Indian interest rates rose five times between June 2006 and last March and have been on hold since then.

Some economists thought a cut likely, particularly after the US Federal Reserve slashed rates last week.

Rupee concerns

But the RBI indicated that it was ready to cut interest rates if there was any sign of a slowdown.

"Developments in global financial markets in the context of the sub-prime crisis would warrant more intensified monitoring and swift responses with all available instruments to preserve and maintain macroeconomic and financial stability," it said.

The current gap between US interest rates and Indian interest is the largest in three years.

There is some concern that the disparity could push the rupee higher and make Indian exports less competitive on the world market.

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