Reserve Bank of Interest Rate Not Raised This Time But More Increases Deemed Possible
April 6, 2023
There was a central bank interest rate surprise today. The policy rate had previously been raised since May 2022 by a total of 250 basis points from a record low of 4.0% to 6.5%. That tightening had been engineered in six consecutive incremental hikes, including one of 25 basis points at the prior review in February. Analysts were anticipating a seventh move, matching the diminished size of February’s action. Instead, officials at the Reserve Bank of India by unanimous vote agreed to leave the liquidity adjustment rate unchanged at 6.5%. A released statement makes clear that the long-term priority remain inflation reduction toward the target corridor that is centered on 4.0% versus the current 12-month CPI increase of 6.4%. The monetary policy committee promised to “continue to keep a strong vigil on the evolving inflation and growth outlook and will not hesitate to take further action as may be required in its future meetings.” But with an eye on tightening lending conditions around the world, they opted to pass this time, noting that “recent financial stability concerns have triggered risk aversion, flights to safety and heightened financial market volatility.”
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Reserve Bank of India
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