Money matters

A few weeks ago, the Reserve Bank of India (RBI) raised its policy rate by 50 basis points mainly with the intention of containing inflationary pressures. Its intention has been quickly transmitted onwards by most banks, which have raised their base lending rates by a similar amount. During the fiscal year 2010-11 the RBI was quite circumspect in its anti inflationary stance and tended to underestimate the prospects of price rise in its projections. The present move is a much more vigorous response and has led to widespread public debate because of its timing.

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