The Reserve Bank of India on Wednesday surprised markets by raising the key borrowing rate for the first time in nearly four years.
It raised the so-called repo rate — the interest rate at which the central bank lends to commercial banks — by 40 basis points to 4.4% from a record low of 4%.
The surprise rate hike was a reflection of the urgency of needing to curb rising costs, said senior economist at Kotak Mahindra Bank, Upasana Bhardwaj.220413 The trend of rising inflation is expected to continue, increasing the burden on consumers in India, seen here shopping in New Delhi in April.
Bhardwaj predicted that inflation won't ease despite anticipated further rate hikes. She predicted that the central bank could raise a further 100 basis points for the rest of the calendar year. "Price pressures will persist above 6% through most of the rest of the calendar year," she told CNBC's "Street Signs Asia."The surprise rate hike was an attempt to curb costs, which have been rising for the past three quarters.
"It is an acknowledgment that the excesses introduced during the pandemic [would] have to be withdrawn much more quickly," she said, predicting that it was a harbinger of more rate"[This] will happen much more quickly than anticipated. In the next two to three months, there should be at the very least another hike of 75 basis points," she said, adding that the pace of the hikes would depend on the trajectory of inflation in the months ahead.
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