Adequate response: on the RBI and inflation
The Reserve Bank of India's Monetary Policy Committee has raised interest rates by 25 basis points to combat rising inflation. The move signals a shift toward 'calibrated tightening' as the central bank attempts to manage supply-side pressures and inflation expectations.
Why it matters
Monetary policy shifts directly impact consumer borrowing costs and the broader economic growth trajectory in India.
After months of waiting and watching, the Reserve Bank of India (RBI)’s Monetary Policy Committee (MPC) has decided to act to try to rein in rising inflation . Its decision to raise interest rates by 25 bps seemed increasingly inevitable. The RBI now projects retail inflation at 4.9% in Q2, higher than its August projection of 4.7%. This is set to rise in Q3 to 6% before easing marginally to 5.7% in Q4. Global oil prices have again crossed $100 a barrel following a brief reprieve. India’s oil marketing companies, likely following government instructions, have held off on passing most of this increase on to consumers. However, they cannot withstand such fiscal pressures forever. The impact of higher crude prices has been bad enough, but higher petrol and diesel prices will likely send inflation spiralling.
Get smarter about the news
Sign up free for a feed built around what you actually care about, Dive Deeper research on any story, and the full text of every article.
Create free accountAlready have an account? Sign in