New Delhi ( CNN ) -- In an attempt to curb runaway inflation , India 's central bank raised its benchmark interest rates for the tenth time in sixteen months on Thursday , despite a slowdown in economic growth . The Reserve Bank of India said in a statement that inflation had reached `` uncomfortable levels '' and increased the repo rate at which it lends to commercial banks by 25 basis points to 7.5 percent . The reverse repo rate at which the central bank pays commercial banks for deposits was raised to 6.5 percent . These measures come as government data this week showed Indian 's inflation climbed to a higher-than-expected 9.06 percent in May from a year earlier , driven mainly by an increase in prices of manufactured goods . But the central bank 's previous rate hikes have made little difference in the cost of living in India . `` If India is to grow in a fast pace then demand must increase and an approach for controlling demand by hiking interest rates will not exactly increase the growth rate or the development of this economy , '' economic adviser to the Federation of Indian Chamber of Commerce and Industry Anjan Roy said . India now has the highest inflation rate of any large Asian economy . Analysts say the government 's priority is to tame inflation even if its at the expense of economic growth . Reserve Bank Governor Duvvuri Subbarao said in a statement last month that bringing the current elevated rates down should `` take precedence even at the cost of some growth in the short run . '' The government has delayed a decision to hike diesel fuel prices fearing it would further stoke inflation . `` Inflation is a very important factor in India , in fact the fortunes of governments depend on the course of inflation particularly food items , so it is predictable that the RBI will take this course , '' Roy said `` but to be honest inflation in India has proven to be insensitive to interest rate hikes . Inflation is going up and interest rates are going up . '' Roy said the Indian government must now take a supply side management approach to curb rising prices . Asia 's third largest economy grew 7.8 percent from January to March , the slowest pace in five quarters . Analysts say the slower growth is making it harder for the second-fastest-growing major economy in the world to pull hundreds of millions of people out of poverty .
Reserve Bank of India raises key interest rates . Inflation climbed to 9.06 percent in May . Comment: The government is printing money, and the central bank has been buying up a lot more than it needs for that purpose ( which means they are not actually selling any new bonds ).