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India central bank keeps interest rate unchanged despite worrying inflation

MUMBAI--India's central bank surprised many Wednesday by keeping its key interest rate unchanged despite the worrying rise in inflation.

The Reserve Bank of India held the benchmark rate at which commercial banks borrow from it steady at 7.75 percent.

It had been widely expected to raise the rate for a third time in a row after November inflation rates were worse than expected. Ninety percent of bankers polled by local CNBC-TV 18 ahead of the decision had predicted another 0.25-percent hike.

However, the bank also is walking a tightrope in its monetary policy because raising interest rates too high could weigh down already sluggish economic growth. Asia's third-largest economy hit a 10-year low earlier in its expansion this year before improving somewhat to 4.8 percent in the most recent quarter, still far below the average 8-percent growth India saw for the past decade.

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