New Delhi: War on inflation is not over yet. We cannot be complacent, Reserve Bank Governor Shaktikanta Das said, while clearing the air about the decision on tweaking policy rates being driven by the ground situation and not by his whims. He made these remarks while speaking at an event organised by the industry chamber CII.
Shaktikanta Das was responding to a suggestion that RBI will take a pause in the interest rates in the upcoming monetary policy meetings. He pointed out that the RBI has hit the pause button in a surprise in April. The RBI decided to keep the key benchmark policy rate at 6.5 per cent. Until April, the RBI has been on a rate hiking spree which saw an overall increase of the repo rate by 250 basis points for almost a year from May 2022.
Rationale behind repo rate hike- "It's not in my hands. It all depends on the situation on the ground. I am driven by what's happening on the ground. What is the outlook on ground? What are the trends? How is the inflation buildup or the inflation softening? So, it's all there. So, it's not a decision which is entirely in my hands, because I am driven by what's happening at the ground level. So, to that extent, you know, I think I will leave it at that," the Governor said.
What next, war on inflation- War on the inflation is not over yet, according to the Governor despite the moderation of the retail inflation. "We need to stay alert. There is no cause for complacency. Especially, we have too see how the El-Nino factor... what is to be expected... How the El-Nino plays out." He forecasted that the next inflation print is expected to be lower than 4.7 per cent. The inflation based on the consumer price index (CPI) was 4.7 in April.
The Governor also assured the gathering that the Indian banking system remains stable and resilient with strong capital, liquidity position and improving asset quality. "RBI will remain proactive and prudent, and will do its best to support the economy to maintain financial stability of India," he iterated. Das informed that the RBI is fine-tuning the Central Bank Digital Currency (CBDC) architecture based on the experience so far.
