India’s central bank yesterday raised its key short-term interest rates by 25 basis points – its 10th hike in 16 months – in a bid to tame high inflation stuck at “uncomfortable levels”.

The Reserve Bank of India raised its repo rate – at which it lends to commercial banks – to 7.50 per cent and increased the reverse repo – the rate it pays to banks for deposits – to 6.50 per cent.

The repo rate is now at its highest since November 2008.

“Inflation persists at uncomfortable levels and much above our comfort zone,” the RBI governor Duvvuri Subbarao said in a statement released after bank policymakers met in Mumbai.

The central bank decision came after data this week showed annual inflation accelerated to a higher-than-expected 9.06 per cent in May, from 8.66 per cent the previous month.

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