1 week ago
India Faces Tougher Rate Choices as Inflation Pressures Broaden
Prices in India have been rising faster than they did earlier this year.
Food, services, and fuel are all adding to inflation.
Oil has become especially expensive, which could make petrol and diesel cost more.
If fuel prices rise again, overall inflation could go above 6%.
The Reserve Bank of India may raise interest rates to try to slow price increases.
The article expects one increase in October and another in December.
Higher rates can make loans more expensive for families and small businesses.
This could hurt growth, which is expected to slow to about 7% this year.
Policymakers must balance controlling inflation with keeping borrowing affordable.
Retail inflation rose to 4.8% year-on-year in August, up sharply from sub-3% levels at the start of the year.
Higher food prices, firmer services inflation, and rising core inflation are making price pressures more broad-based.
Crude oil above $100 a barrel could increase India’s import bill and lead to further petrol and diesel price increases.
A Rs 7.50-a-litre fuel-price increase could push inflation above 6%, complicating the Reserve Bank of India’s task.
The article anticipates 25-basis-point rate increases in October and December, despite concerns about slower growth and costlier credit.
- Who
- The Reserve Bank of India, its Monetary Policy Committee, households, and small businesses are central to the discussion.
- What
- The article examines prospective interest-rate increases to contain broadening inflation pressures in India.
- Where
- India, with inflation affected by global crude-oil prices and worsening conditions in West Asia.
- When
- A 25-basis-point increase is discussed for October, followed by another in December; the article also refers to a rate decision on Wednesday.
- Why
- Food, services, core, and fuel-related price pressures are rising, while policymakers seek to prevent inflation expectations from becoming entrenched.
Key facts
- August retail inflation
- 4.8% year-on-year
- Food inflation
- Nudging 6%
- Crude oil price
- Above $100 a barrel globally; the Indian crude basket is around $120-$125 a barrel
- Potential fuel-price increase
- Rs 7.50 a litre for petrol and diesel
- Projected rate path
- 25 basis points in October and another 25 basis points in December
- Expected inflation
- Consensus estimates place headline inflation at 5.5%-6% for September-November
- Expected growth
- About 7% this year
Sources
Related news
RBI Seen Raising Repo Rate Amid Inflation and Oil Risks
Crude Tops $100 as RBI Rate-Hike Pressure Intensifies
August Inflation Surge Puts India’s October Rate Decision In Focus
Rising Inflation Strengthens Case for Higher Interest Rates
India’s Inflation Shock Deepens as Oil Prices Surge
SBI Warns of Broadening Inflation, Signals Two Rate Hikes
Airfares May Stay High Even as Jet Fuel Falls
Iran Says Diplomacy Is Only Path in US-Israel Conflict
Trump-Xi Summit’s Pageantry Masks Limited Progress, Beijing Gains
Police Robot Fires at Vans Near RAF Fairford Airbase
Kabaddi Leads Asian Games’ Lineup of Regional Sports
