Key Takeaways
- Indian central bank raises repo rate to 5.5%.
- First rate hike in nearly four years due to inflation and economic growth.
- Monsoon rains and oil prices contribute to price pressures.
The Indian central bank has raised its benchmark repo rate by 25 basis points to 5.5%, marking the first increase in nearly four years. This move comes amid rising inflation and robust economic growth, as reported by the Business Recorder.
The six-member rate panel voted unanimously in favor of the rate hike, changing the monetary policy stance to 'calibrated tightening' from 'neutral'.
Governor Sanjay Malhotra stated that the outlook for inflation is no longer benign, highlighting the need for this adjustment.
Economists had anticipated a 25 basis point increase, with nearly 60% expecting this outcome in a Reuters poll.
Consumer inflation accelerated to 4.82% in August, above the Reserve Bank of India’s 4% medium-term target for a third consecutive month.
Nearly half of the consumer basket is experiencing inflation above 4%, with higher prices of fuel and food contributing to the overall rise.
Economic growth remains strong, with GDP growth for the April-June quarter standing at 7.8%, exceeding the central bank’s forecast of 7%.
The central bank’s decision to raise rates is aimed at managing inflationary pressures while maintaining economic stability.
The move is part of a broader global trend of central banks tightening monetary policy in response to rising inflation and economic conditions.
