India holds off on 6.5% rate hike due to EFE’s global volatility

New Delhi, Apr. 6 (.)- The Reserve Bank of India (RBI, the issuing agency) on Thursday announced a pause in its monetary policy of interest rate hikes, after six consecutive hikes to 6.5%. Due to banking crisis and high inflation.

The central bank’s Monetary Policy Committee (MPC) unanimously decided to keep rates at 6.5%, and the majority opted for a tighter monetary policy to reduce inflation and support growth, announced Monetary Authority of India Governor Shaktikanta Das.

“I want to underline that the decision to suspend interest rates is for this meeting only,” Das said, explaining the move needed to assess the central bank’s previous rate hike.

Das pointed to the recent banking crisis in the US and Europe, with the collapse of Silicon Valley banking and the Swiss takeover. Credit Suisse (SIX:) UBS (SIX:), responsible for global volatility that worries Indian banking officials.

The Asian country’s banking system is “healthy”, Das noted, and the country’s economic activity is “booming”, with gross domestic product (GDP) growth of 7% in the recently concluded fiscal year 2022-23. , and 6.4% for the current year (April 2023 to March 2024).

However, the RBI pointed out that inflation reached 6.4% last February, moderate compared to previous months but still above the desired limits.

The Reserve Bank of India, which hiked interest rates by 250 basis points since May last year, expects inflation to be 5.2% in the current fiscal.