New Delhi, May 22 (EFE).- The Indian central bank Friday left the key borrowing and lending rates unchanged to encourage growth amid an economic strain caused by the Ukrainian conflict that has upped essential commodity prices.
The Reserve Bank of India’s (RBI) monetary policy committee kept the lending rate unchanged at a record low of 4 percent.
The reverse repo rate, or the borrowing rate, will stay at 3.35 percent.
The unchanged rates, extended for another three months, seek to stimulate the economy by increasing demand, RBI Governor Shaktikanta Das told reporters.
The bank will thus maintain the accommodative policy at least until its next meeting amid high inflation accelerated by the rise in the international oil prices.
The RBI has been implementing the monetary policy stance for the last two years to ease the financial stress and improve access to capital after the economy came to a grinding halt due to the coronavirus pandemic.
It has allowed the injection of liquidity into the Indian economy, consequently influencing the rate of inflation.
Deputy governor Michael Patra said the monetary panel of the bank was already in favor of beginning to withdraw the ultra-accommodative stance in the coming months.
The bank revised its retail inflation estimate to 5.7 percent for the current financial year, compared with the earlier projection of 4.5 percent.
Das said the bank has upped its inflation projections as “heightened geopolitical tensions since end-February have upended the earlier narrative and considerably clouded the inflation outlook for the year.”
The bank cut its economic growth forecast to 7.2 percent from 7.8 percent as projected earlier for the current financial year.
“While the pandemic quickly morphed from a health crisis to one of life and livelihood, the conflict in Europe has the potential to derail the global economy,” Das said.
“Caught in the cross-current of multiple headwinds, our approach needs to be cautious but proactive in mitigating the adverse impact on India’s growth, inflation and financial conditions,” he said. EFE