Inflation will continue longer, predicts RBI

Wednesday 06th July 2022 07:40 EDT

The Reserve Bank of India said the shock waves from the war in Ukraine and retaliatory economic and financial sanctions (on Russia) have jolted the global economy, which was already beleaguered by successive waves of the Covid-19 pandemic.

It has predicted in its financial stability report that persistently high inflation globally is to stay here longer than anticipated as the ongoing war and sanctions take toll on economies, threatening a further slowdown to global trade volume. The global economic outlook is clouded by the ongoing war in Europe and the pace of monetary policy tightening by central banks in response to mounting inflationary pressures, RBI report said.

According to the report, “The Indian economy appears to have weathered the third wave of the pandemic associated with the Omicron variant, although the war in Ukraine is now casting a long shadow on the outlook”.

Since its previous edition of FSR in December 2021, RBI said, the global economic prospects have deteriorated markedly consequent to the economic and financial ramifications of the war and sanctions taking their toll.

Citing IMF projecting global growth to decline to 3.6% in 2022 from 6.1% in 2021 as the shock of the war was to interact with the monetary tightening, financial market volatility, pandemic and unequal vaccine access, RBI said both AEs (advanced economies) and emerging market and developing economies (EMDEs) are expected to lose pace by 1.9 percentage points and 3 percentage points, respectively.

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