India’s Central Bank Confirms Another Rate Hike

Shaktikanta Das, the head of India's Central Bank, confirmed what everyone already knew: another interest rate hike is coming in June. The central bank is attempting to contain inflation while also attempting to stimulate an economy still recuperating from the pandemic. After a surprise rate hike earlier this month, the repo rate was raised to 4.4 percent from 4 percent, demonstrating Das' shift from dovish to hawkish views.

Higher interest rates help cut inflation, according to a hawkish policy, which Das and the RBI are now pursuing. A dovish approach, on the other hand, favours low interest rates and expansionary monetary policies to increase demand. Quantitative tightening and quantitative easing are the terms used to describe the two policies.

The rate at which the Reserve Bank of India loans money to banks is known as the Repo Rate. A rise in the repo rate raises banks' borrowing costs, which are then passed on to borrowers. When borrowing money becomes more expensive, people and businesses cut back on their spending, lowering demand and, as a result, inflation.

As a result, firms will have less money at their disposal, thus limiting their expansion and negatively impacting the economy's overall growth.