Reserve Bank of India

June 6, 2018

A trend reversal in the interest rate cycle has occurred. For the first time since January 2014, monetary officials raised their key repo and reverse repo rates to 6.25% and 6.0%, respectively. Although the future rate bias remains “neutral,” a released statement presents a picture of greater upside inflationary risk despite recently lower food cost pressures.

  • Fuel prices rose sharply in April.
  • “Domestic economic activity has exhibited sustained revival in recent
    quarters and the output gap has almost closed.”
  • Crude-level prices have risen more sharply and sooner than officials were expected, and that development does not appear to be transitory.
  • Evidence exists that household inflation expectations have moved up.
  • The global environment including such things as geo-political risks, global financial market volatility and the threat of trade protectionism pose additional challenges.

The next policy review is seven weeks away.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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