Reserve Bank of India Raises Interest Rate

August 5, 2022

The Reserve Bank of India engineered a third hike of its policy interest rate, lifting such by 50 basis points to 5.40%. This matched June’s incremental rise, which had followed an initial 40-basis point increase in May. The rate is now at its highest level since September 2019. A released statement explained today’s move:

With inflation expected to remain above the upper threshold in Q2 and Q3, the MPC stressed that sustained high inflation could destabilize inflation expectations and harm growth in the medium term. The MPC, therefore, judged that further calibrated withdrawal of monetary accommodation is warranted to keep inflation expectations anchored and contain the second-round effects.

A 7.0% CPI inflation rate in June exceeded the medium-term target range of 2-6%.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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