Pausing interest rate hike not in my hands, depends on the on-ground situation: RBI governor
- Inflation has moderated, but there is no room for complacency, said the
RBI governor, speaking at a CII event.
- RBI will remain proactive and prudent, and will do its best to support the economy to maintain financial stability,
- Das however sounded a cautious note on El Nino, a weather phenomenon that’s on the horizon.
AdvertisementGovernor of the Reserve Bank of India (RBI) , Shaktikanta Das, on Wednesday said the next retail inflation print would most likely be lower than 4.7%. Retail inflation hit an 18-month low at 4.7% in April.
“Inflation has moderated, but there is no room for complacency. War against inflation is not over. Pausing
He also said the Indian banking system remained stable and resilient with strong capital, liquidity position and improving asset quality. And that,the central bank would remain proactive and prudent, and would do its best to support the economy to maintain financial stability.
Besides, he said, credit offtake in banks also is remaining quite resilient, and it is 15.5% as per the latest figure.
"And on top of that, we have the advantage of demography, which again is a huge opportunity for India. And it's something which will eventually add to our potential output or what some people prefer to call it India's growth potential. That's a theme, which will play out in the medium to long term," he said.
He expressed confidence India could clock a growth of 6.5 per cent during the current financial year on the back of these tailwinds. The central bank will also ensure adequate availability of liquidity to meet production requirements of the economy, he assured.
Retail inflation inches close to lower end of RBI tolerance limit
In the month of April, retail inflation, or consumer price index (CPI) inflation which came in at 4.7% — and has been closing in on the lower tolerance limit of RBI’s 4-6% band.
For the last three quarters, the country’s retail inflation has been above RBI's upper tolerance limit of 6%. It fell back into the central bank’s comfort zone only in November 2022.
The persistently high inflation over months led to RBI’s monetary policy committee hiking the base interest rates six times before taking a pause in the last monetary policy in April. Since May 2022, RBI has raised rates by a total of 250 basis points.
In spite of displaying confidence on cooling inflation, Das did not make any comments on a further pause in rate hikes. “Have to see how El Nino plays out,” he said at the CII event.
El Nino is a band of warm ocean water that spans from South America to Asia triggering far-reaching weather changes. It has affected economic growth and caused losses in two separate events in the early 80s and late 90s.
According to new research published in the journal Science, this phenomenon is on its way yet again and could potentially wipe out $3 trillion from the world economy.
(With inputs from PTI)
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