1 hr ago
RBI Hikes Repo Rate, Rules Out Near-Term Cuts
India’s central bank has made borrowing more expensive by raising its main interest rate.
The rate is now 5.50%.
Governor Sanjay Malhotra said the bank does not expect to cut rates soon.
Its next move could be another increase or a pause, depending on how the economy and prices change.
The bank is concerned that prices are still rising and could spread across more goods and services.
It also warned that a weak monsoon, El Niño and changing oil prices could add pressure.
Global uncertainty and supply-chain problems may also affect India’s economy.
Higher rates can make loans more expensive for households and businesses.
The Reserve Bank of India raised its policy repo rate by 25 basis points to 5.50%.
The Monetary Policy Committee unanimously voted for the increase and shifted its stance from neutral to calibrated tightening.
Governor Sanjay Malhotra said near-term policy action would be a rate hike or a pause, depending on economic conditions; rate cuts are off the table.
The RBI expects headline inflation to average almost 5.8% over the next three quarters and core inflation to be 4.4% this financial year.
The RBI cited supply pressures, monsoon and El Niño risks, volatile oil prices, global uncertainty and supply-chain disruptions.
- Who
- The Reserve Bank of India’s Monetary Policy Committee, led by Governor Sanjay Malhotra.
- What
- The MPC raised the policy repo rate by 25 basis points to 5.50% and ruled out near-term rate cuts.
- Where
- India.
- When
- Wednesday; the article also refers to a possible review in December.
- Why
- The RBI cited inflation that is not benign, risks of broader price pressures, and supply-side concerns.
Inflation control
Growth and borrowers
Higher interest rates
Inflation control
The RBI said recalibrating the policy rate was imperative amid inflation risks and signs of price pressures becoming more generalised.
Growth and borrowers
The article warns that further increases could raise borrowing costs for households and businesses, weigh on investment and add pressure to an economy struggling to sustain momentum.
Key facts
- Repo rate after increase
- 5.50%
- Rate increase
- 25 basis points
- MPC vote
- Unanimous
- Policy stance
- Shifted from neutral to calibrated tightening
- Near-term policy options
- A rate hike or a pause; rate cuts are off the table, depending on conditions
- Headline inflation outlook
- Expected to average almost 5.8% over the next three quarters
- Core inflation outlook
- Projected at 4.4% this financial year
- Risks cited
- Deficient southwest monsoon, El Niño, volatile international oil prices, global uncertainty and supply-chain disruptions
Quotes
Sanjay Malhotra
Governor of the Reserve Bank of India
“It (MPC) underscored that given the current conditions, rate cuts are off the table in the near-term and policy action ahead can only be a rate hike or a pause, depending on the evolving conditions and the outlook”
indianexpress.com
indianexpress.com
“more like a forward guidance”
indianexpress.com
Sources
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