India exchange traded funds on Tuesday were recovering some of their recent losses in the wake of the most recent interest rate hike from the Reserve Bank of India.
India’s central bank has raised interest rates in an effort to stave off inflation. On Friday, the RBI boosted rates by a quarter-point to 8.25%. The bank has boosted rates 12 times in the past 20 months.
Inflation hit its highest rates in 13 months, registering 9.75 in August. [India ETFs Grapple with Inflation]
“The decision clearly points out that the RBI’s top priority is curbing inflation despite concerns about global turmoil,” Indranil Sen Gupta, economist at Bank of America Corp., said on Bloomberg. “There will be pressure on inflation after last evening’s petrol-price increases and the rupee’s depreciation.”
The weak rupee, mixed with higher food and gas prices, are adding to inflation. The rupee lost 5.4% this quarter, in response to investors selling off emerging market shares. [ETF Chart of the Day]