RBI Hits Pause On Interest Rate Hike, Says Won’t Hesitate To Act If Needed
The Reserve Bank of India (RBI) Governor Shaktikanta Das today decided to pause repo rate hikes, maintaining the key benchmark interest rate at 6.5 percent.
The central bank has already raised rates by 250 basis points since May last year.
Real Gross Domestic Product (GDP) growth for 2023-24 is projected at 6.5% with 1st Quarter (Q1) at 7.8%, Q2 at 6.2%, Q3 at 6.1% and Q4 at 5.9%, the RBI governor stated adding that economic activity remains resilient and headline Inflation is projected to moderate in Financial Year(FY) 2023-24.
In a tightening cycle, a premature pause in monetary policy action would be a costly policy error, Governor Shaktikanta Das had said earlier.
The governor had also stated that in a world of high uncertainty, giving out explicit forward guidance on the future path of monetary policy would be counterproductive.
Retail inflation was up 6.44 per cent year-on-year in February, declining from 6.52 per cent in January but has stubbornly remained above the RBI’s mandated target range of 2 per cent-6 per cent.
Unseasonal rains could push up food prices high and OPEC’s move to cut output recently has also lead to a hike in oil prices which could further add to imported inflation.
India’s manufacturing segment grew at its fastest pace in three months in March while services industry growth slowed slightly from February’s 12-year high, private business surveys conducted by S&P Global showed.
Some economists were of the opinion that signs of trouble in the US and European banking sector could lead to tighter financial conditions and a steeper global slowdown. Early signs of a slowdown in India are also visible in easing imports and plateauing bank credit demand.
Banking system liquidity has improved recently after having been in deficit towards the end of March.
(With inputs from agencies)