Reserve Bank of India Hikes Key Rate by 50 Basis Points to 4.90% as CPI Overshoots
2022.06.08 09:46
By Geoffrey Smith
Investing.com — The Reserve Bank of India became the latest major central bank to tighten monetary policy by more than expected, raising its key repo rate by half a point to 4.90% at its regular policy meeting.
The RBI’s move follows a similar step by its counterparts in Australia and New Zealand over the last few weeks, and adds to evidence of central banks around the world taking ever more dramatic steps to rein in inflation. The consumer price index in India rose at its fastest in eight years in April, at 7.79%, well above the 6% upper limit of the bank’s tolerated range.
In his policy statement, Governor Shatikanta Das put the move down largely to the consequences of Russia’s invasion of Ukraine, which has caused sharp and sustained rises in prices for food, energy, and other commodities.
“The war has led to globalization of inflation,” Das said. “Not surprisingly, central banks are reorienting and recalibrating their monetary policies. Emerging market economies are facing bigger challenges from increased market turbulence, monetary policy shifts in advanced economies and their spillovers.”
The rupee, which has lost over 4% against the dollar so far this year as the Federal Reserve has moved to a more aggressive tightening of its policy, recovered 0.3% by 2:25 AM ET (0625 GMT) to trade at 77.699.
