India’s sharp rise in inflation will require an increase in interest rates ahead, said two members of the central bank’s Monetary Policy Committee (MPC) minutes of its May 4 meeting released on Wednesday.The Reserve Bank of India raised the repo rate, the lending rate of banks, by 40 points to 4.40%, at a random meeting two weeks ago, marking the first change in the rate in two years and its first increase about four years.
“Since April, the risks of inflation have become even more pronounced in terms of size and resilience,” wrote Jayant Varma, an MPC MP.”It seems to me that more than 100 points of interest rates should be done soon,” he added.All six MPC members have one vote and the governor has a veto in the event of an equality.
Inflation rise
Inflation based on consumer price index rose above 7.79% in April each year, remaining above the 6% RBI tolerance band for the fourth consecutive month. Inflation for the year, the producer’s inflation rate rose to 15.08% in April, with two digits remaining for 13 consecutive months.”Due to a reasonable recovery and a sharp rise in inflation, which will also increase inflation, inflation is needed to prevent the real inflation from escalating,” said AshimaGoyal, another MPC member, in minutes. “Government action on the service delivery side can reduce future inflation, product deregulation and borrowing costs,” he added.
Much of India’s inflation is driven by supply chain pressures mainly due to rising global commodity prices, especially oil.India imports more than 80% of its oil demand and high green prices around the world have been boosting world trade and current account deficits and fueling inflation in other countries. “The political situation has caused us inflation that we cannot afford. As long as the country’s crisis and acts of retaliation continue, inflation will continue,” said Deputy Prime Minister Michael Patra in the minutes.Globally, stagflation could change from a dangerous situation to a basic one, warns Patra.”Minimum RBI policy meeting minutes highlight members changing their priorities from growth to inflation,” said Sanjay Pawar, fund manager – LIC Mutual Fund Asset Management Ltd.”We are seeing further RBI upgrades in the near future as imprint inflation printing is expected to be higher than the RBI’s high tolerance band.”
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