NEW DELHI, Dec 23 Reuters India39;s future interest rate hikes should be carefully calibrated and its intervention in the foreign exchange market should be limited to managing volatility, the International Monetary Fund IMF said on Friday.

The Reserve Bank of India RBI has raised its key policy rate by 225 basis points since May, taking the rate to the highest in over three years.

Inflation pressures have led to an appropriate shift towards policy tightening, IMF said in an annual consultation report. The report is prepared by IMF staff in accordance with its Article IV of Agreement, which requires the fund to hold annual consultations with officials from member states about economic development and policies.

Additional tightening should be carefully calibrated and communicated, it added.

Last week, minutes of the RBI39;s monetary policy meeting showed a majority of ratesetters were concerned about elevated inflation and felt the central bank could not afford to prematurely pause its rate tightening cycle.

The IMF projected inflation at 6.9 for the current fiscal year that ends on March 31, 2023 and said price gains would moderate gradually.

The world39;s fifthlargest economy is broadly tipped to outperform its major global peers in the year ahead, supported by pentup postpandemic domestic demand, investment and credit growth, analysts say.

However, the IMF expects India39;s economic growth to moderate reflecting a less favourable outlook and tighter financial…