India's central bank hikes key rate by 50 bps, warns of rising price pressures | Inquirer Business

India’s central bank hikes key rate by 50 bps, warns of rising price pressures

/ 02:41 PM September 30, 2022

MUMBAI – The Reserve Bank of India’s benchmark repo rate was raised by 50 basis points on Friday, the fourth straight increase in the current cycle, as policymakers extended their battle to tame stubbornly above-target retail inflation rate.

The monetary policy committee (MPC), comprising of three members from the RBI and three external members, raised the key lending rate or the repo rate to 5.9 percent with five out of the six voting in favor of the hike.

ADVERTISEMENT

The RBI has now raised rates by a total 190 basis points since its first unscheduled mid-meeting hike in May but inflation continues to remain stubbornly high – a phenomenon that is affecting much of the global economy.

“The inflation trajectory remains clouded with uncertainties arising from continuing geopolitical tensions and nervous global financial market sentiments,” Governor Shaktikanta Das said in his address accompanying the MPC’s decision.

FEATURED STORIES

“In this backdrop, MPC was of the view that persistence of high inflation, necessitates further calibrated withdrawal of monetary accommodation to restrain broadening of price pressures, anchor inflation expectations and contain the second round effects. This action will support the medium-term growth prospects of our economy,” he added.

The U.S. Federal Reserve’s relentless and aggressive interest rate hikes over recent months to curb inflation have battered the rupee, and most other emerging and developed market currencies.

Policymakers around the world are grappling with a sweeping shift away from their respective currencies and into the safe-haven dollar, raising worries of capital outflows and further damage to their economies.

Economists say the RBI too would need to focus on ensuring the interest rate differential is not too low. [

The standing deposit facility rate and the marginal standing facility rate were also increased by the same quantum to 5.65 percent and 6.15 percent, respectively.

India’s annual retail inflation rate accelerated to 7 percent in August, driven by a surge in food prices, and has stayed above the RBI’s mandated 2-6 percent target band for eight consecutive months.

The benchmark 10-year bond yield eased marginally after the RBI’s decision to 7.3737 percent at 0440 GMT while the partially convertible rupee weakened to 81.63 per dollar, from 81.57 prior to the policy decision.

The NSE Nifty 50 index was down 0.10 percent at 16,801.85, and the S&P BSE Sensex fell 0.07 percent to 56,373.19.

Read Next
Don't miss out on the latest news and information.

Subscribe to INQUIRER PLUS to get access to The Philippine Daily Inquirer & other 70+ titles, share up to 5 gadgets, listen to the news, download as early as 4am & share articles on social media. Call 896 6000.

TAGS: central bank, India, interest rate hike
For feedback, complaints, or inquiries, contact us.

Subscribe to our business news

By providing an email address. I agree to the Terms of Use and acknowledge that I have read the Privacy Policy.



© Copyright 1997-2022 INQUIRER.net | All Rights Reserved

We use cookies to ensure you get the best experience on our website. By continuing, you are agreeing to our use of cookies. To find out more, please click this link.