RBI cuts growth, hikes inflation forecast as West Asia crisis bites

Key points

• MUMBAI: Caught between a slowing economy and the risk of a fresh price spiral triggered by the conflict in West Asia, the RBI on Friday left the repo rate unchanged at 5.25%, cut its growth forecast for FY27 and raised its inflation projections, while signalling that the inflation threat could broaden economy-wide beyond fuel and commodities if supply-side pressures persist.Governor Sanjay Malhotra stopped short of tightening policy but left little doubt that the central bank is wary of what it calls the "generalisation" of inflation.
• While higher oil prices and disrupted supply chains have already started feeding into costs, the Monetary Policy Committee preferred to wait for more clarity on the duration and intensity of the conflict before acting."Although the impact of cost pressures is becoming visible, going ahead, the rise in prices of energy and other inputs coupled disruptions is likely to weigh on economic activity," the governor said.The...