MUMBAI (AFP) – 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 per cent, the sixth and smallest increase since May when it stood at four per cent.
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 four per cent 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”.
The US Federal Reserve has reduced the size of its rate hikes in recent months, while the European Central Bank has remained hawkish.
Fed chairman Jerome Powell said Tuesday that further tightening would be needed if data showed a strengthening jobs market, adding that inflation “has a long way to go”.
Elsewhere in Asia, Malaysia’s central bank in January kept rates unchanged, while Indonesia and the Philippines signalled they were nearing the end of their rate-hike cycles.
In India, consumer inflation eased to 5.72 per cent in December from 5.88 per cent in November, just below the RBI’s upper band of six per cent. 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 per cent in the 2021-22 financial year.
