The Hindu Editorial Discussion with Vocabulary May

About The Editorial

The RBI recently announced an offcycle increase in the benchmark interest rates to tame inflation as it has eroded consumer’s purchasing power. The policy repo rate has been raised by 40 basis points to 4.4% with immediate effect. Letting inflation remain elevated for too long can cause ‘de-anchoring inflation expectations’ and consequently hurting growth and financial stability. Russia’s invasion of Ukraine has also added fuel to the fire. 

Due to the increase in inflation, RBI has increased the borrowing costs for the first time in 45 months. Moreover, the IMF has declared that the war in Ukraine will slow economic growth in 2022 and the inflation will increase from 2.6 percentage points to 5.7% in developed economies and to 2.8% in developing economies. Furthemore, with the Covid-19 pandemic still lurking, it could trigger a new wave of infections, as seen in China, also adding to the uncertainty. Therefore, the onus is on RBI and fiscal authorities to take measures to curb the inflation.

 

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