The Reserve Bank of India (RBI) is emphasising inflation over growth, as evidenced by recent repo rate hikes, according to a central bank official on Friday.
"Due to substantially greater than predicted inflation, central banks around the world will hike interest rates in the future. This is a serious risk, according to RBI Executive Director Radha Shyam Ratho.
The COVID-19 pandemic had caused unprecedented volatility in financial markets across asset classes and regions over the past two years, the official said at an interactive event organised by the Merchants' Chamber of Commerce and Industry at Kolkatta.
He stated that the RBI is prioritising inflation over growth in order to keep inflation within a goal without hurting growth. The interest rate was recently boosted by 50 basis points to a two-year high of 4.9 percent by the apex bank. The rate hike followed a 40-basis-point raise on May 4 during an unexpected meeting.
According to Ratho, the bond market has also become extremely volatile, which is an uncommon occurrence "He went on to say that this would have an influence on the local economy. Despite the global supply chain being disrupted by the Russia-Ukraine crisis, the RBI official stated that India's external sector is healthy, and the current account deficit (CAD) is manageable with normal capital flows.
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