25 January 2011 Last updated at 05:12 ET

India raises interest rates to curb inflation

Higher food and fuel prices have pushed up the rate of inflation in India

India's central bank has raised interest rates again in an attempt to curb inflation.

The seventh rise in a year took the rate at which the central bank loans to commercial banks from 6.25% to 6.5%, the highest since early 2008.

India's inflation rate rose in December to 8.43%, driven by rising food and fuel prices.

India's rate increase follows rate rises in South Korea and Thailand amid concerns about inflation across Asia.

Reserve Bank of India governor Duvvuri Subbarao said inflation remained at "elevated levels" requiring steps to lower "inflationary expectations".

India's move came as a report on Tuesday from the International Monetary Fund warned about emerging economies overheating.

Rupa Rege Nisture, chief economist at India's Bank of Baroda, said he expected the central bank to raise rates again in February.

Meanwhile, Japan has left its key rate in a 0.0%-0.1% range.

Japan has been gripped by deflation, as falling prices prompt consumers to hold off on purchases in the hope of further price drops.

The Bank of Japan said it expected deflation would end over the next year.