‘Inflation expected to moderate’ as India slows rate hikes
INDIA’S central bank slowed the pace of interest rate hikes last Wednesday (8) but warned that core inflation in the world’s fifthbiggest economy remained stubbornly high.
The Reserve Bank of India (RBI) last Wednesday raised the benchmark repurchase rate by 25 basis points to 6.5 per cent, the sixth and smallest increase since May when it was 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 uppertolerance 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 4.0 percent 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”.
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 per cent in April.
The country of 1.4 billion people was the fastest-growing major economy, expanding at a pace of 8.7 per cent in the 202122 financial year.
But the booming economy is expected to have slowed - albeit to a still robust seven per cent -for the financial year ending March 31, according to a forecast released by the National Statistics Office in January.
The Indian government said last week during its annual budget it would cut income taxes and boost infrastructure and welfare spending, but also pare down the fiscal deficit ahead of national elections next year.