Interest Rate Likely to Remain High for the Moment, says RBI Governor
GG News Bureau
New Delhi, 20th Oct. Interest rates are expected to stay high for now, said Reserve Bank Governor Shaktikanta Das on Friday. He emphasized that the central bank will remain extremely vigilant and closely monitor inflation to ensure a sustained decrease.
Lending rates have increased after the RBI raised the key policy rate by 250 basis points since May 2022 in an effort to control inflation, which reached 7.44% in July. However, retail inflation based on the consumer price index (CPI) has started to decline and fell to 5% in September.
The government has instructed the central bank to maintain inflation at 4% with a margin of 2% on either side.
During the Kautilya Economic Conclave 2023, Governor Das stated that interest rates will remain high, but the duration of this situation depends on the evolving global circumstances.
He also mentioned that the RBI is focused on inflation dynamics and is prepared to take necessary actions to achieve a sustained decline in inflation and reach the target of 4%.
Regarding the impact of the Middle East crisis, Governor Das acknowledged that rising US bond yields and crude oil prices have wider implications for economies worldwide.
However, he emphasized that India’s macroeconomic fundamentals and financial sector remain strong, which is crucial during uncertain times.
He also mentioned that the Indian rupee has remained stable compared to the US dollar, and the RBI is actively involved in the forex market to prevent excessive volatility.
In his address at the Conclave, Governor Das highlighted India’s resilience in the face of slowing global growth and persistent inflation.
He projected a real GDP growth of 6.5% for 2023-24 and stated that India is poised to become the new growth engine of the world.
He reiterated the RBI’s commitment to actively disinflationary monetary policy to ensure a smooth disinflation process.
Governor Das concluded by stating that the RBI will remain alert and promptly respond to the inflation-growth dynamics, using a hawk’s eye or Arjuna’s eye approach.
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