RBI has space for more rate hikes despite growth cheer
Quickening inflation, stoked by oil prices and El Nino, could force policymakers to harden further
On Wednesday, the Reserve Bank of India (RBI) raised its FY27 growth estimates by 40 basis points, citing strong private consumption and sustained investments. This revision underscores the resilience of the Indian economy despite significant headwinds, according to RBI Governor Sanjay Malhotra. The central bank now projects FY27 growth at 7.1%, with second quarter GDP growth at 7.2%, third quarter at 6.9%, and fourth quarter at 6.8%.
While noting the potential for further interest rate hikes if inflation accelerates rapidly, economists believe policymakers have created space for additional hikes. The RBI has projected inflation at 5.2% for the fiscal year, 20 basis points higher than the figure from the August policy meeting. Persistent price pressures have left room for a total of 25-50 basis points of additional rate hikes going forward, according to experts.
Governor Malhotra highlighted that price pressures are evident across a range of commodities within the food component and that early signs of inflation becoming generalized are apparent in the increase of core inflation and higher inflation across the Consumer Price Index (CPI). The RBI projects the CPI at 4.9% for the second quarter, 6% for the third quarter, and 5.7% for the fourth quarter.
Written by urgent.news from The Economic Times - Economy's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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