(MENAFN) The benchmark repo rate was increased by 50 basis points to 5.4 percent by India's central bank on Friday, returning borrowing costs to pre-pandemic levels and citing spillovers from geopolitical events as a significant source of significant uncertainty in the inflation trajectory.
The Reserve Bank of India's rate increase was expected to be only 35 basis points by the markets. Additionally, the bank raised its bank rate, marginal standing facility (MSF), and standing deposit facility (SDF) rates by a combined 50 basis points, bringing them all to 5.65 percent.
It stated in its most recent financial report, "the global economic and financial environment has deteriorated with the combined impact of monetary policy tightening across the world and the persisting war in Europe heightening risks of recession."
The bank anticipates that as cost pressures increase, output costs in the industrial and service sectors would follow suit. Moreover, the annual inflation rate in India, it added, had decreased to 7.01 percent in June from 7.04 percent the month prior, but it still above the upper tolerance zone.
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