India’s Recovering Economy Puts June Rate Increase on Table

India’s economic growth is picking up pace in an environment of rising price pressures, setting the stage for an interest rate increase as early as next week.

Growth accelerated to 7.7 percent in the fourth quarter of the financial year ended March 31, government data showed on Thursday, making it the fastest growing major economy. That’s adding to calls for Governor Urjit Patel to pull the rate trigger at the June 6 monetary policy meeting, and follow central banks in emerging markets from Argentina to Indonesia that have stepped up action to stem outflows and curb a rout in their currencies.

“After Indonesia and Philippines adjusted rate upwards, we think India’s central bank is likely to follow suit and begin policy normalization,” said Shashank Mendiratta, an economist with ANZ Banking Group in Bengaluru, who is forecasting a 25 basis-point hike next week. “Inflation will remain above 4 percent through 2018.”


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