RBI Monetary Policy: Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday said that inflation is expected to remain elevated at around 6 per cent in the second half of FY23. Das while announcing the Monetary Policy Committee (MPC) decision, said that the recent correction in global crude oil prices, if sustained, may provide relief to inflation.

COMMERCIAL BREAK
SCROLL TO CONTINUE READING

Notably, inflation has remained above the central bank's tolerance level of 4 per cent plus/minus 2 per cent (upper limit 6 per cent, lower limit 2 per cent) for the past 8 months.

The central bank retained the inflation projection for FY23 at 6.7 per cent, he said.

“Recent correction in global commodity prices if sustained may ease cost pressures in coming months. Today inflation is hovering around 7 per cent and we expect it to remain elevated at 6 per cent in the second half of the year,” the Governor said.  

The extraordinary global circumstances that caused the heightened inflationary pressures have impacted both advanced economies and emerging market economies, the governor said.

He added, “India is, however, better placed than many of these economies."

If high inflation is allowed to linger, it invariably triggers second-order effects and unsettles expectations, the Das also noted.

Therefore, monetary policy has to carry forward its calibrated action on policy rates and liquidity conditions consistent with the evolving inflation growth dynamics, the governor said adding that it must remain alert and nimble.

The RBI today raised the benchmark lending rate by 50 basis points to 5.90 per cent. This is the fourth consecutive rate hike after a 40 basis points increase in May and 50 basis point hike each in June and August. In all, RBI has raised the benchmark rate by 1.90 per cent since May this year.

The latest RBI action follows the US Federal Reserve affecting the third consecutive 0.75 percentage point interest rate increase, taking its benchmark rate to a range of 3-3.25 per cent earlier this month.