Bucking the current trend of central bank sentiment in Asia, the Reserve Bank of India increased interest rates for the 13th time in almost 2 years today.  Benchmark repurchase rates were hiked higher by 25 basis points to 8.5% from the previous 8.25%.

Although the central bank had noted that inflationary pressures were expected to moderate late in the first half of next year, policymakers couldn’t cast aside the current rise of inflationary pressures. According to a report released earlier this month, consumer prices are now rising by 9.72% annually.  This is compared to China, another BRIC nation, which is experiencing a 6.1% rise in consumer prices.  However, Governor Duvvuri Subbarao, along with other central bankers, noted in a statement that this may be the last in a series of rate hikes as economic growth is expected to slowdown in the upcoming quarter.  The scenario is likely being supported by earlier figures that showed a manufacturing sector that grew the least in almost 2 1/2 years – coupled with a thinning out of consumer demand.

Nonetheless, the USDINR exchange rate fell, dropping by almost 0.5% to trade at 49.42 in New York trading following the announcement.  So far this year, the Indian Rupee has been a major Asian currency disappointment, in the red by 13.6%  against the US dollar since the summer.