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India's inflation higher than peers like Brazil and South Korea

The RBI last week raised its key interest rate by 25 bps to 6.50 per cent

inflation
Inflation is as high as 11.8 per cent in Russia. And 10.5 per cent in the UK, 8.5 per cent in the Eurozone and 6.5 per cent in the USA
Samreen Wani New Delhi
3 min read Last Updated : Feb 13 2023 | 10:40 PM IST
India now has higher inflation than some emerging market peers.

The latest inflation figure of 6.52 per cent is above the Reserve Bank of India (RBI) tolerance band of 2-6 per cent, which is higher than peers, such as Brazil and South Korea, shows a Business Standard analysis of data from central bank websites across the world. India had among the lowest inflation numbers relative to peer economies earlier. 

South Korea’s latest inflation number was 5.2 per cent while it was 5.77 per cent in Brazil. Central banks in both countries have increased rates at a faster pace than Indian from the pandemic lows, when global interest rates were aggressively cut to limit the negative economic effects of the Covid-19 pandemic.

South Korea has raised interest rates by 300 basis points (bps) from its pandemic low. A 100 bps is 1 per cent. Brazil has raised its interest rate by 1,175 bps. Others, including the US, the UK, South Africa, and the Eurozone, have all increased rates at a faster pace.

The RBI last week raised its key interest rate by 25 bps to 6.50 per cent. This recent hike, which is the sixth in this cycle, marks a cumulative 250 basis points rise from the 4.00 per cent repo rate seen amid the pandemic. This is lower than most other large peer economies.

The UK saw a cumulative increase of 390 bps from 0.1 per cent in March 2020. Interest rates are up 450 bps in the US and South Africa has increased its interest rate by 375 bps to 7.25 per cent since the pandemic.

Central banks raise interest rates to control inflation. This makes borrowing costlier as banks also raise the rates at which they give out loans.

The central bank committee deciding on interest rates also laid out that global growth is expected to decelerate in 2023 as a result of the continuing economic and financial effects of the pandemic. It indicated that military hostilities in Ukraine which have pushed up inflation in world economies would also continue to be a key factor to keep an eye on.

Inflation is as high as 11.8 per cent in Russia. And 10.5 per cent in the UK, 8.5 per cent in the Eurozone and 6.5 per cent in the US.

Topics :InflationRBIIndian Economy

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