India keeps interest rate unchanged as inflation fears mount

NEW DELHI: India's central bank kept borrowing costs unchanged, signaling an end to its deepest round of interest-rate cuts on concern that inflation will "creep up" from October.

The Reserve Bank of India held its reverse repurchase rate at 3.25 percent, according to a statement in Mumbai yesterday. The central bank raised its inflation forecast for the year to March 31 to "around 5 percent" from an April estimate of 4 percent, citing "elevated" food and commodity prices.

Inflation risks increased after Finance Minister Pranab Mukherjee this month unveiled plans to raise spending and widen the budget deficit to a 16-year high to bolster growth. Policymakers from Tokyo to London, who in some cases cut interest rates to close to zero, have started to discuss when they will exit from the emergency measures put in place to ease a global credit freeze.