Page last updated at 14:11 GMT, Wednesday, 11 June 2008 15:11 UK

India raises rates unexpectedly

Rupee
India's central bank is not alone in having to contain quicker inflation

India's central bank has unexpectedly increased its key interest rate to 8%, in a bid to counter inflation.

The quarter point rate increase, from 7.75%, is the first since March 2007.

While analysts thought an interest rate rise was likely in coming months, they were not forecasting the Reserve Bank of India do make its move so soon.

However, they added that the increase was unlikely to have a deep impact on the market and that higher prices, notably for energy, needed addressing.

Saumitra Chaudhuri, a member of the prime minister's economic advisory council said: "There was always a possibility that there would be an interest rate increase but perhaps most people may have expected this a bit further down the line than at this point in time."

One of the main causes of quickening inflation has been rising energy prices worldwide.

The price of crude oil has been soaring to record highs recently, climbing past $139 a barrel.

India recently reduced import duties on crude oil and petroleum products to offset losses at state-operated refineries and energy firms.


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