Central Bank of India rises reference interest to 5.5% due to war

“ Afollowing a detailed analysis of the evolution of the macroeconomic and financial situation, the latest events and prospects, the Monetary Policy Committee voted unanimously in favour of increasing the reference interest rate of the central bank's repo market by 25 basis points, setting it at 5.5%", said the governor of the RBI, Sanjay Malhotra.

The repo rate is the interest rate that RBI charges when lending money to commercial banks.

The issuer explained that there are early signs of widespread inflation in the sixth largest economy in the world, which is expected to reach 5.2% this year, driven in part by the disturbances that the war in the Middle East caused on the global energy market.

“ The short-term outlook on inflation points out that supply-side pressures remain, due to various reasons, such as a poor southwest monsoon, El Niño conditions and the high volatility of international oil prices,” Malhotra argued.

The Committee also indicated that it went from a “neutral position” to future economic policy decisions to a “calibrated hardening”, anticipating that it is inclined to increase or maintain the fees unchanged at the forthcoming meetings.

According to the governor, despite the adverse international context, the forecast of real GDP growth was revised upwards to 7.1% this year, following positive results in the services and manufacturing sectors.

“ The upward review of growth forecasts at 40 basis points makes the robustness of economic activity even more evident despite the important obstacles mentioned above,” he said.