The Reserve Bank of India's key interest rate was raised by 50 basis points on Wednesday as widely expected, in the second hike in as many months, in a bid to cool persistently high inflation.
The Standing Deposit Facility rate and the Marginal Standing Facility Rate were adjusted higher by the same quantum to 4.65% and 5.15%, respectively.
Wednesday's increase follows a 40-bps rise in early May at an unscheduled meeting that kicked off the central bank's tightening cycle, which economists expect to be relatively short.
"Upside risks to inflation as highlighted in last policy meetings have materialized earlier than expected," Das said after the policy decision.
He said inflation will likely remain above the RBI's upper tolerance band in the first three quarters of the financial year that started on April 1.
Retail inflation in April accelerated to 7.79% from a year earlier, above the RBI's tolerance band for inflation of 2% to 6% for a fourth month in a row, and a further rise in global prices of crude oil, food and other commodities is expected to keep up the upward pressure.
The price spikes have hammered consumer spending and darkened the near-term outlook for India's economic growth, which slowed to the lowest in a year in the first three months of 2022.
India's central bank maintained its growth projection at 7.2% for 2022/23.
The central bank had slashed the repo rate by a total of 115 bps since March 2020 to soften the blow from the COVID-19 crisis.
India's 10-year benchmark bond yield fell to 7.5% after the policy decision, while the rupee strengthened against the dollar to 77.69.