The central bank signalled that more increases could follow amid inflation concerns.
RBI adopts hawkish stance
The RBI cited rising energy prices and global trade uncertainty as factors adding to price pressures. It indicated that further rate rises may be needed to contain inflation risks.
The rate rise from 5.25 percent follows the RBI’s efforts to manage inflation while balancing economic growth. The central bank’s hawkish stance comes as price pressures mount internationally.
Outlook on borrowing and credit growth
Higher borrowing costs for consumers are expected as a result of the new rate. This is likely to weigh on credit growth in India going forward.
Projections from banks differ on how much further the RBI may raise rates this cycle, with Yes Bank predicting a full percentage point increase and HDFC Bank expecting a 0.75 percentage point rise.
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Source: Reserve Bank of India
