India raises interest rates to 6.5% worried about inflation

By: News Team

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India raises interest rates to 6.5% worried about inflation

The Reserve Bank of India (RBI, issuing entity) announced on Wednesday the increase for the sixth consecutive time of the Interest rates, with an increase of 25 basis points to 6.50 percent, with the aim of keeping inflation at bay in the next fiscal year.

The central bank’s Monetary Policy Committee (MPC) decided, by a majority of four of its six members, to “increase interest rate policy by 25 basis points to 6.50 percent with immediate effect,” the governor of the financial institution, Shaktikanta Das, said in a televised statement today.

This is the sixth consecutive increase made by the Indian central bank since last May. In sum, the RBI has since raised the interest rate by 250 basis points, while trying to leave behind the accommodative policies it implemented during the coronavirus pandemic crisis.

The MPC also decided to “remain focused on removing the accommodation to ensure inflation stays within target, while supporting growth,” Das said in his statement.

The decisions were made considering that, he explained, the global outlook no longer “looks as bleak now as it did a few months ago,” and that growth prospects in major economies have improved while inflation is falling, although it remains above targets.

India has a medium-term inflation target of 4% with a 2% band for the consumer price index (CPI).

The governor assured that the Indian economy remains resilient with a preliminary estimate of real GDP growth of 7 percent in 2022-2023 driven by private consumption and investment, according to the Central Bureau of Statistics (CSO).

While the projection for the period 2023-2024 estimates a growth of 6.4 percent, with its greatest acceleration in the first quarter: 7.8 percent, followed by the second quarter with 6.2 percent. Projections for the last two quarters of the year are 6.0 and 5.8 percent respectively.

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