India raises interest rates to dampen inflation
MUMBAI (REUTERS) - India surprisingly raised interest rates on Tuesday to dampen inflation, saying it was now better prepared to deal with the risk of major capital outflows roiling emerging economies.
The Reserve Bank of India (RBI), however, said that if retail inflation eases as projected, it does not foresee further near-term monetary policy tightening.
India's rupee sank 11 per cent last year as emerging markets sold off sharply after the US central bank announced it would taper its aggressive bond-buying programme that had fuelled global demand for risk assets.
Expectations that the Federal Reserve will further scale back stimulus this week have renewed pressure on emerging economies although the rupee has fared better than other currencies this time. Turkey's central bank was expected to raise rates to defend the lira at an emergency meeting later on Tuesday.