India raises base rate to 7.25 per cent

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India's central bank stepped up its fight against stubbornly high inflation yesterday, raising interest rates by a bigger-than-expected 50 basis points to 7.25 per cent, and vowing to battle price pressures even at the cost of economic growth. The rate rise was double analysts' forecasts, although the case for stronger action had been building since inflation in March reached nearly 9 per cent. It also cast doubt on the government's 9 per cent growth targets.

The Reserve Bank of India has been among the world's most aggressive central banks, with nine rate rises since March 2010. But its tightening has failed to cool inflation, initially driven by high food and fuel prices, and more recently by demand pressures.