India Hikes Interest Rate to 5.90% to Combat Inflation

India’s central bank raised its key interest rate by 50 basis points to 5.90% on Friday, the fourth increase this year, citing challenges such as slowing growth, rising food and energy prices, debt distress, and currency depreciation.

Inflation in India is expected to average 6.7% in the current fiscal year, which ends in March 2023, according to Reserve Bank of India (RBI) governor Shaktikanta Das. He said in a statement issued after a meeting of the bank’s monitoring committee that June was the sixth consecutive month in which inflation was above the bank’s tolerance level of 6%.

He assured the public that ending the accomodative monetary policy was still the central bank’s primary focus.

For the current fiscal year, the bank’s monetary committee reduced its estimate of real economic growth from August’s 7.2% to the current level of 7%. The first quarter of the next fiscal year is expected to see economic growth of around 6.7%.