India central bank holds rates as it assesses Mideast shock
The Reserve Bank of India said the benchmark repurchase rate, the level at which it lends to commercial banks, would remain at 5.25% after a unanimous vote by a six-member panel.
Mumbai, India - India's central bank maintained interest rates at 5.25% on Wednesday, amid concerns over the potential economic impact of the ongoing Middle East conflict. The Reserve Bank of India (RBI) held the benchmark repurchase rate steady after a unanimous decision by its six-member Monetary Policy Committee (MPC). This decision came as retail inflation in June reached 4.4%, surpassing the bank's medium-term target of 4% for the first time in 17 months.
The RBI acknowledged that the recent rise in inflation was primarily driven by supply-side pressures, particularly from food and fuel costs, rather than being broad-based. Governor Sanjay Malhotra stated that while economic growth was being driven by resilient domestic demand, inflation had not yet become widespread. He emphasized the need for more clarity on the path and composition of inflation before taking any further policy actions.
The central bank's assessment is further complicated by the weakening Indian rupee, which dropped to a record low prior to the June policy meeting. India, the world's third-largest consumer of oil, typically imports about half of its crude through the Strait of Hormuz. This region has been effectively blocked since the conflict began on February 28, making India highly vulnerable to the potential economic repercussions of the Middle East crisis.
Analysts warn that higher crude and fertilizer prices could lead to increased import bills and further inflationary pressures for the Indian economy.
Written by urgent.news from Free Malaysia Today's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
