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59% jump in inflation due to Ukraine war: SBI

At least 59% of the increase in inflation is because of the geopolitical conflict. The SBI Research found in its latest report. It’s futile to blame central banks for high inflation across the world. It also said that the Reserve Bank of India (RBI) would undoubtedly raise rates in the forthcoming June and August policy announcements. RBI will take it to the pre-pandemic level of 5.15% by August in the wake of a continued increase in inflation.

However, the report raises the question if inflation will tread down meaningfully. Because of such rate hikes if war-related disruptions do not subside quickly. Retail inflation is measured through the consumer price index (CPI). This soared to a multi-year high of 7.79% in April as food and fuel prices saw further hikes. This is the highest rate of inflation recorded in the Indian economy since May 2014. The rate of inflation in March stood at 6.95%. As per the SBI Research report, the latest inflation numbers reveal that in the rural areas, the impact has been disproportionately higher for food prices. Fuel price impact and pass-through have been concerns in urban areas since the war began.

The RBI, in an off-cycle meeting of the monetary policy committee (MPC), hiked the benchmark repo rate by 40 bps to 4.40%. In its last meeting held from April 6-8, the MPC had kept the policy rates unchanged even as inflation reached an eight-month high. The global concerns around high inflation prompted the RBI to take immediate action. The SBI wing says its study shows that because of war alone, food and beverages. It assumed that vegetable price increase was primarily because of seasonal factors that are primarily domestic. Since February, fuel, light, and transport contributed a 52% increase in overall inflation.

By Ram

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