India slows rate hikes but inflation still ‘sticky’
MUMBAI
Alamy Photo
India’s central bank slowed the pace of interest rate hikes yesterday but warned that core inflation in the world’s fifth-biggest economy remained stubbornly high.
Central banks around the world yanked up borrowing costs last year to arrest soaring prices due to the Ukraine war, but many have now slowed the pace of rate hikes as inflation cools.
The Reserve Bank of India (RBI) yesterday raised the benchmark repurchase rate by 25 basis points to 6.5 percent, the sixth and smallest increase since May when it stood at 4 percent.
The move was in line with most analysts’ expectations.
Most had also expected the RBI to change its policy stance from neutral to accommodative, meaning it would be the last hike in the current cycle, but bank governor Shaktikanta Das kept the door open for further tightening.
“Consumer price inflation in India moved below the upper-tolerance level during November and December 2022... core inflation, however, remains sticky,” Das said in a webcast.
“Looking ahead, while inflation is expected to moderate in 2023-24, it is likely to rule above the 4 percent target.”
Das added that the outlook was clouded by “continuing uncertainties from geopolitical tensions, global financial market volatility, rising non-oil commodity prices and volatile crude oil prices.”
In India, consumer inflation eased to 5.72 percent in December from 5.88 percent in November, just below the RBI’s upper band of 6 percent. Inflation had soared as high as 7.79 percent in April.
The South Asian nation of 1.4 billion people was the fastest-growing major economy, expanding at a pace of 8.7 percent in the 2021-22 financial year.
But the booming economy is expected to have slowed, albeit to a still robust 7 percent, for the financial year ending March 31, according to a forecast released by the National Statistics Office in January.