India’s central bank raises interest rates by 0.50% amid fears that inflation will hurt the economy

The Reserve Bank of India (RBI) today raised its repo rate by 0.50% to 5.40%, the third rate hike in recent months, in a bid to curb surging inflation.

It has been predicted that Indian inflation, which reached 7% in June, will prompt the RBI to raise interest rates again. Some expect the RBI to raise rates by 0.25%, while others expect a 0.50% increase.

The surge in inflation has had a major impact on consumer spending and is overshadowing the trend in Indian economic growth in the medium term. In the first quarter of this year, the Indian economy recorded its lowest growth rate in a year.

The Governor of the Reserve Bank of India stated that inflation figures continue to rise in the second and third quarters of fiscal year 2022 and the RBI believes that such high inflation will undermine stability and economic growth in the medium term. Therefore, the committee today unanimously decided to raise interest rates by another 0.50% to curb inflation.

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