Interest Rate: Interest rates to remain high, vigilant on inflation: RBI governor
NEW DELHI: Interest rates will remain high, the Reserve Bank of India (RBI) governor Shaktikanta Das said on Friday and asserted that the central bank remains extra vigilant on the evolving inflation dynamics to ensure a sustained easing of price pressures.
“Interest rates will remain high. How long will they remain high, I think only time and the way the world is evolving will tell,” Das said while responding to a question at the Kautilya Economic Conclave.
“We are extra vigilant and we stand ready to take whatever action needs to be taken. We need to see a sustained decline in inflation. Our objective is to reach 4%,” Das said on the sidelines of the event, while speaking to reporters. He said against the backdrop of the uncertainties in the world, India’s macroeconomic fundamentals remain strong. “Our macroeconomic fundamentals continue to be sound. Eventually, in these uncertain times what matters is your macroeconomic fundamentals and how strong is your financial sector. I think on both these parameters India is well placed,” the RBI governor said.
Earlier in his address at the conclave, Das said retail inflation has moderated sharply to 5% in September 2023 with correction in vegetable prices, but cautioned that the outlook on food inflation, however, is beset with uncertainties.
The RBI governor said core inflation (i.e., CPI excluding food and fuel) has eased by around 170 basis points to 4.5% from its recent peak in January 2023. “As evident from our survey of September 2023, there is further progress on anchoring of inflation expectations which entered single digit zone for the first time since the Covid-19 pandemic. In the current situation, monetary policy must remain actively disinflationary to ensure that the ongoing disinflation process progresses smoothly,” said Das.
He said the 250-basis points interest rate hike announced by the RBI so far is still working through the financial system and the central bank has also appropriately fine-tuned its communication to ensure successful transmission of the rate hikes.
Stating that price stability and financial stability complement each other, Das said price stability is an anchor for financial stability, but the trade-off between the two becomes a close call at times. “It has been our endeavour to manage these complementarities and trade-offs as efficiently as possible. While according priority to price stability keeping in mind the objective of growth, as mandated under the law, we treat financial stability as non-negotiable. Our policies and choices of instruments are guided by this holistic approach,” said Das.
“Interest rates will remain high. How long will they remain high, I think only time and the way the world is evolving will tell,” Das said while responding to a question at the Kautilya Economic Conclave.
“We are extra vigilant and we stand ready to take whatever action needs to be taken. We need to see a sustained decline in inflation. Our objective is to reach 4%,” Das said on the sidelines of the event, while speaking to reporters. He said against the backdrop of the uncertainties in the world, India’s macroeconomic fundamentals remain strong. “Our macroeconomic fundamentals continue to be sound. Eventually, in these uncertain times what matters is your macroeconomic fundamentals and how strong is your financial sector. I think on both these parameters India is well placed,” the RBI governor said.
Earlier in his address at the conclave, Das said retail inflation has moderated sharply to 5% in September 2023 with correction in vegetable prices, but cautioned that the outlook on food inflation, however, is beset with uncertainties.
The RBI governor said core inflation (i.e., CPI excluding food and fuel) has eased by around 170 basis points to 4.5% from its recent peak in January 2023. “As evident from our survey of September 2023, there is further progress on anchoring of inflation expectations which entered single digit zone for the first time since the Covid-19 pandemic. In the current situation, monetary policy must remain actively disinflationary to ensure that the ongoing disinflation process progresses smoothly,” said Das.
He said the 250-basis points interest rate hike announced by the RBI so far is still working through the financial system and the central bank has also appropriately fine-tuned its communication to ensure successful transmission of the rate hikes.
Stating that price stability and financial stability complement each other, Das said price stability is an anchor for financial stability, but the trade-off between the two becomes a close call at times. “It has been our endeavour to manage these complementarities and trade-offs as efficiently as possible. While according priority to price stability keeping in mind the objective of growth, as mandated under the law, we treat financial stability as non-negotiable. Our policies and choices of instruments are guided by this holistic approach,” said Das.
