RBI policy rate hike: RBI’s decision to hike policy rate to help economy in medium term, says Assocham

RBI policy rate hike: RBI’s decision to hike policy rate to help economy in medium term, says Assocham


industry body Assocham said on thursday Reserve BankThe decision to increase the benchmark lending rate by 50 basis points to 4.9 per cent will help the Indian economy in the medium term. The central bank on Wednesday hiked the repo rate for the second time in five weeks. Earlier, it had increased the short-term lending rate by 40 basis points (bps) on May 4.

Assocham President Sumant Sinha said through a clearly coordinated approach between the two countries reserve Bank of India And Finance MinistryThe Indian government and monetary policy makers have managed the challenging global environment with foresight and calmness.

“The RBI’s move to increase the policy interest rate by 50 bps within a short time frame will help the Indian economy in the medium term,” Sinha said.

He further said that inflation, although a concern, is still within a relatively manageable range, especially when compared to many parts of the world.

“It is understandable that there is concern about rate hikes resulting in higher EMIs, but in the long run, the resulting price stability will play a vital role in supporting rising demand, which is important,” he said.

Sinha said the RBI will continue to work closely with the government and other stakeholders such as India Inc to ensure that the economic recovery momentum emanating from the third wave of the pandemic is sustained in a high interest rate environment.

Controlling inflation is critical to sustain the economy’s strong growth momentum, especially given global challenges including high energy and food costs, he said.

Overall, the RBI move is necessary and well-reasoned, given the current macro-economic currents, the Assocham chairman said.

Meanwhile, Nilanjan Banik, Professor Finance and Economics at Mahindra University, said that the RBI has done the right thing by raising the repo rate.

“This would complement the government’s approach to controlling inflation by reducing the excise duty on petrol and banning the export of wheat and sugar. When monetary and fiscal policy work together, as in this case, to control inflation. But the impact will be very rapid,” Banik said.

Home, auto and other loan EMIs will increase after the decision of reserve Bank of India (RBI) to raise the prime interest rate by 50 basis points to beat extremely high inflation.


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