Global economy seeing ‘tectonic shifts’ from Ukraine war: RBI governor

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Ukraine war: The central bank’s governor referred to the ‘tectonic shifts’ while talking about the commencement of the war in Europe, followed by sanctions and escalating geopolitical tensions.

The global economy is seeing “tectonic shifts” from the Ukraine war and extreme volatility in commodity and financial markets, RBI governor Shaktikanta Das said on Friday as he revealed that the key interest rates – the lending and the borrowing rate – remain unchanged for the 11th time in a row. “We are confronted with new but humongous challenges. Shortage in key commodities, fractures in international financial architecture and fear of de-globalisation. Extreme volatility characterises commodity and financial markets,” he said.

The central bank’s governor referred to the ‘tectonic shifts’ while talking about the commencement of the war in Europe, followed by sanctions and escalating geopolitical tensions. The RBI would maintain orderly financial condition in market and will take steps to contain impact of global spillovers, he underlined.

But the central bank said it would restore the width of the liquidity adjustment facility to 50 basis points, which was seen as a first step to move away from the ultra loose monetary policy embraced during the COVID-19 pandemic.

“It may be noted that given the excessive volatility in global crude oil prices since late Feb and extreme uncertainty over evolving geopolitical tensions, projection of growth and inflation is fraught with risk and largely contingent upon future oil and commodity price developments.”

“Taking into account all factors and on the assumption of a normal monsoon during 2022 and the average crude oil price that is the Indian basket at USD 100 per barrel, inflation is now projected at 5.7 per cent in 2022-23 with Q1 at 6.3 per cent, Q2 at 5 per cent, Q3 at 5.4 per cent and Q4 at 5.1 per cent,” the RBI governor said.

Russia launched an offensive in Ukraine on February 24 and multiple countries – including the US – have slapped sanctions on Moscow to pressure the country for recalling its troops.

(With inputs from Reuters and PTI)



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