India raises key interest rate for second time to stave off inflation

RBI hikes repo rate by 25 basis points to 6.50% maintains neutral stance

RBI hikes repo rate by 25 basis points to 6.50% maintains neutral stance

The Bank of England has increased interest rates to their highest level for almost 10 years after the summer heatwave helped the economy bounce back from a snow-hit start to the year.

Mortgage lender Housing Development Finance Corporation (HDFC), meanwhile, hiked home loan rates by 20 basis points.

At lunchtime today, United Kingdom time, the Bank of England looks set to raise interest rates for just the second time since the financial crisis.

The rate action was in line with a Reuters poll last week, which showed 37 of 63 economists expecting a rate increase.

The Reserve Bank of India's (RBI's) Monetary Policy Committee (MPC), headed by governor Urjit Patel, hiked the policy repo rate by 25 basis points (bps) to 6.50 per cent after the conclusion of the third bi-monthly policy meet on Wednesday. That was the first increase since January 28, 2014 when rates were hiked by a similar proportion to 8 percent.

"Against the above backdrop, the MPC chose to increase the policy repo rate by 25 basis points".

"Whilst costs for Scottish households with variable interest rate mortgages will rise, the overall cost of borrowing remains low by historical standards".

"Every saver now has their fingers crossed that this latest base rate rise may go some way to returning rates to those levels, but like last time, providers are likely to be slow to react and choosy with their increases".

Most UK homeowners are on a fixed interest rate mortgage, and won't see an immediate increase to their payments.

He said "limited" and "gradual" increases were required to bring inflation down to its 2 per cent target now that the United Kingdom economic growth appeared to be picking up again.

But it also said inflation - now running at 2.4 per cent - was set to rise slightly higher than it had predicted in May's set of forecasts after recent falls in the value of the pound and higher energy prices.

India's annual consumer inflation hit 5 percent in June, the eighth straight month it topped the RBI's medium-term 4 percent target.

"As a outcome of that, a disruption to the level of economic activity, higher prices for a period of time".

He said: "Rates can be expected to rise gradually.

Steel consumption also accelerated in May", the central bank said in a media release.

"Guidance and communication from the MPC over recent months, and in particular the lack of any attempt to rein in the ever higher market-implied probability of a 25bp hike, suggests a majority of members are set to vote for a hike on Thursday", he said.

After Thursday's interest rate rise, interest rates stand at 0.75%, unemployment is forecast to fall below 4% and the United Kingdom economy expected to grow faster than the 0.2% in the first quarter of the year.

Asked about whether a two-year transition period was sufficient, he said "we'll make it enough" as he did not want to "add to the pile" of issues that needed to be negotiated.

Back in 2010, just 38% of people who took out a new mortgage fixed their rates, according to the Financial Conduct Authority.

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