India's central bank raises key interest rate, lowers growth forecast

India's central bank raised its key interest rate to tame stubbornly high inflation and cut its economic growth forecast.

The announcement of a quarter percentage point increase in the lending rate Tuesday to 8 percent sent Indian stocks lower. That added to losses accumulated during a sell-off in emerging markets that began late last week.

The Reserve Bank of India cut its economic growth forecast for the fiscal year ending March to 4.6 percent from 5 percent.

But it predicted the economy could recover to 5-6 percent growth in the year ending March 2015 provided the global economy improves, inflation eases and investment projects worth more than $63.5 billion move ahead.

The bank last month left lending rates unchanged despite high inflation.