New Delhi: Interest rates are likely to remain high for some time, Reserve Bank governor Shaktikanta Das said, stressing the central bank will remain extra vigilant to ensure a sustained decline in inflation.
The lending rates are ruling high after the RBI cumulatively hiked the key policy rate (repo) by 250 basis points since May 2022 in a bid to tame inflation which touched a high of 7.44 per cent this July.
The consumer price index (CPI) based retail inflation is now declining and fell to 5 per cent in September. The government has mandated the central bank to ensure inflation remains at 4 per cent with a margin of 2 per cent on either side.
“Interest rate will remain high. How long they will remain high, I think only time and the way the world is evolving will tell,” the governor said in response to a query at an economic conference here.
Responding to queries on the impact of the crisis in West Asia, the governor said that in the last fortnight, US bond yields have risen, which has wider implications for other economies. Crude oil prices have also gone up.
“Some of these uncertainties were there, but they have become more pronounced in some sense. What is different in the context of India, we are impacted by whatever is happening all over, no doubt about that. But our macroeconomic fundamentals continue to be sound.”
MPC minutes
The members of the Reserve Bank of India’s (RBI) monetary policy committee (MPC) reiterated their fight against inflation and said that any more monetary policy action will be data dependent, minutes of their three-day meeting held from October 4-6 showed.
The interest-rate setting body had then left the policy repo rate unchanged at 6.50 per cent for the fourth time in a row.
The minutes showed RBI deputy-governor Michael Debabrata Patra saying that inflation prints for September and October needed to be monitored carefully to look out for the moderation that its projections anticipate.
“If we tame inflation durably, we will prepare the ground for a long innings of strong and stable growth. Our projections anticipate that growth will gather positive momentum from the second quarter onwards,” he said.
