Strong global headwinds to keep rates high: RBI Governor

RBI Governor’s remarks come at a time when new uncertainties are emerging on account of Israel–Hamas war [View in browser]( [See all newsletters]( 21 October 2023 Strong global headwinds to keep rates high: RBI Governor [File photo of RBI Governor Shaktikanta Das ] Rates to stay firm Amid global headwinds and the ongoing geopolitical crisis, the [RBI]( Governor on Friday said interest rate will remain high for now. He also said monetary policy must remain “actively disinflationary” to ensure that the decline in inflation from its peak of 7.44 per cent in July continues smoothly. “Interest rate will remain high...how long they will remain high I think only time and the way the world is evolving will tell,” Das said while responding to a question during Kautilya Economic Conclave organised by the Finance Ministry and the Institute of Economic Growth. Retail inflation though slipped to a 14-month low of 5 per cent in September, but uncertainty looms over low interest rate. New uncertainties This remark has come at a time when new uncertainties are emerging on account of Israel–Hamas conflict and the continuing [Russia-Ukraine war](. These conflicts have the potential to impact supply chains and impact inflation. Earlier this month, a few hours before the Hamas strike on Israel, RBI’s Monetary Policy Committee (MPC) had decided to pause the policy rate during for the fourth time. In his opening remarks, Das said the RBI remains “extra vigilant” on the evolving [inflation]( dynamics. In the current situation, monetary policy must remain actively disinflationary to ensure that ongoing disinflation process progresses smoothly, he said. “In the world we live in today, beyond giving a generalised kind of forward guidance that we will be very alert, we will be extra vigilant, we will monitor the inflation-growth dynamics with the hawk’s eye or Arjuna’s eye. We will remain alert, and we will be very prompt in our response,” said Das. On inflation On the sidelines of the conclave, Das said the RBI remains very focused on the inflation dynamics. “We are extra vigilant and we stand ready to take whatever action that needs to be taken. We need to see sustained decline in inflation. Our objective is to reach 4 per cent,” he said. On elevated crude oil prices in the international market, he said: “What matters is the pump price in India”. Pump price of petrol and diesel is important as far as inflation in India is concerned, he added. Responding to queries on impact of crisis in Middle East, the RBI Governor said 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 on that,” he said. He also said the dollar index has become strong and bond yields in the US have reached an all-time high. “But if you look at the volatility of the Indian rupee, from January 1 till now, the rupee depreciation is 0.6 per cent whereas on the other side, the appreciation of the US dollar for the same period has been 3 per cent. So, rupee is stable. We are there in the forex market to prevent excessive volatility,” the Governor added. You Might Also Like [Government working on ways to lower debt burden: Finance Minister]( [Economy]( [Government working on ways to lower debt burden: Finance Minister]( [Adani Cement raises $3.5 bn to refinance debt]( [News]( [Adani Cement raises $3.5 bn to refinance debt]( [SEBI eases norms for large corporates borrowing from debt market]( [Markets]( [SEBI eases norms for large corporates borrowing from debt market]( [MFs rush to SEBI to resolve call recording conundrum]( [Markets]( [MFs rush to SEBI to resolve call recording conundrum]( Stay informed Subscribe to businessline to stay up-to-date with in-depth business news from India [arrow]( Copyright @ 2023, THG PUBLISHING PVT LTD. If you are facing any trouble in viewing this newsletter, please try [here]( Manage your newsletter subscription preferences [here]( If you do not wish to receive such emails go [here](