The Reserve Bank of India lifted the repo rate by 25 basis points to 5.5 percent and shifted its stance to calibrated tightening. It raised its inflation forecast to 5.2 percent and its growth forecast to 7.1 percent.
India's central bank raised its benchmark repo rate by 25 basis points to 5.5 percent on Wednesday, the first increase in nearly four years, Reuters reported from Mumbai. The six-member panel voted unanimously. The bank changed its stance from neutral to calibrated tightening.
Governor Sanjay Malhotra said the duration and extent of any further increases would depend on growth and inflation. He said headline consumer inflation is expected to average almost 5.8 percent over the next three quarters. The bank lifted its inflation forecast for the financial year to 5.2 percent from 5 percent and core inflation to 4.4 percent from 4.3 percent.
It also raised its real GDP growth forecast to 7.1 percent from 6.7 percent. Reuters said India joined other central banks in tightening as higher oil prices linked to the Iran war feed inflation, with weak monsoon rains adding to price pressure. Nearly 60 percent of economists in a Reuters poll had expected a 25 basis point rise.
HDFC Bank economist Sakshi Gupta said she expects another 50 to 75 basis points of hikes in coming months. That is an analyst view, not an RBI commitment. The next policy date was not stated in the Reuters report used here.
People Sentiments Mixed
- Sanjay Malhotra said further increases would depend on actual inflation and growth data.
- Sakshi Gupta of HDFC Bank said she expects another 50 to 75 basis points of rate hikes.