India pauses rate hikes citing global market 'uncertainty'
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The world's unprecedented economic uncertainty has reached India, leaving the benchmark repurchase rate at 6.50 percent.
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A security guard stands outside the Reserve Bank of India (RBI) head office in Mumbai, India, Tuesday, July 26, 2011. (AP)
For the first time in nearly a year, India's central bank held interest rates on Thursday because of "unprecedented uncertainty" in global markets, but announced a commitment to taming persistent inflation.
The Reserve Bank of India (RBI) left the benchmark repurchase rate at 6.50 percent after the recorded hikes at six of its prior meetings since May 2022.
The hike in inflation defied all market expectations of a 25 basis points hike and witnessed a recent increase by the Federal Reserve, the Bank of England, and the European Central Bank.
In a statement, bank governor Shaktikanta Das said, "What we are witnessing today is unprecedented uncertainty in geopolitics, economic activity, price pressures, and financial markets never seen before."
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"The decision to pause on the repo rate is for this meeting only" and the bank's Monetary Policy Committee remained "focused on the withdrawal of accommodation", he added.
The RBI raised rates after prices soared on the back of the Ukraine war.
In February, inflation remained at 6.44 percent, above the RBI's upper hand of six percent, but in April 2022, it dropped from a peak of 7.79 percent. "Our job is not yet finished, and the war against inflation has to continue," Das said. "And this has to continue until we see a durable decline in inflation closer to the target."
This week the World Bank cut its India growth forecast to 6.3 percent from 6.6 percent for the financial year to March 2024, citing "slower consumption growth and challenging external conditions".
According to a survey of nearly 20,000 adults conducted by Ipsos, #inflation was concerning only 8% of adults back in September 2020 while 40% of them said that it was a worry last month. pic.twitter.com/EZhOCZIJhW
— Al Mayadeen English (@MayadeenEnglish) October 16, 2022
Global inflation
On a related note, and in a statement released by the House of Commons treasury committee in January, the IMF warned that the British public will be passing through torrid times as the new fiscal plan tries to counteract inflation during times of recession. This dire situation is assessed to be the result of the skyrocketing energy prices.
The inflation rate in the UK hit a four-decade high in January, increasing to 11.1%, and the government explained the reasons for this economic downturn as being due to the Covid pandemic and the war in Ukraine.
The Resolution Foundation think tank assessed that the British public is set for more economic grievances as the value of their income continues to deteriorate. It reported that British families have only experienced half of the lost income they are expected to suffer during 2023.
Per the preliminary estimates of the statistical office of the European Union, Eurostat, the annual inflation in 19 eurozone countries slowed down to 6.9% in March from 8.5% month-on-month.
In a statement, Eurostat said that the "Euro area annual inflation is expected to be 6.9% in March 2023, down from 8.5% in February, according to a flash estimate from Eurostat."
The annual inflation rate across the Eurozone in December reached 9.2%, after which it dropped to 8.6% in January.
