Indian central bank raises key lending rate in bid to check inflation

New Delhi, Aug 5 (EFE).- The Reserve Bank of India on Friday announced a hike in its key lending rate, raising it to 5.4 percent, to try and check inflation in the country, which is expected to touch 6.7 percent for the current financial year.

The RBI’s monetary policy committee decided to “increase the policy repo rate (…) by 50 basis points to 5.40 per cent with immediate effect,” RBI governor Shaktikanta Das told reporters on Friday.

The measure is aimed at curbing inflation, which has remained above the tolerance band of 6 percent since the beginning of the year, and is expected to be around 6.7 percent for the financial year 2022-2023, set to end in March next year.

In its analysis, the RBI estimated a 16.2 percent growth for the current quarter ending in July, which is expected to drop to 4 percent by the last quarter between January and March, with the annual growth for FY 2022-2034 projected to be around 7.2 percent.

This is the third time in the current fiscal cycle that the central bank has raised lending rates in the country, after a half percentage point hike in June – up to 4.9 percent – which followed a four basic points rise in May.

The May hike was the first change in the key rate since May 2020.

The price rise comes after the Indian economy witnessed a growth spurt, with the economy growing at 8.7 percent during the FY 2021-2022, according to estimates by the Central Statistics Office.

This was the highest growth rate for the Indian economy since 1999, and its fourth highest in the last 60 years, although it came after a year of coronavirus-linked slowdown.

The economy witnessed another slump during the third Covid-19 wave in January, followed by the beginning of the Russian invasion of Ukraine, which has led to growth forecast for the last quarter ending March 2022 to be reduced to 4.1 percent. EFE

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