Amidst the ongoing tension in the Middle East and fluctuating crude oil prices, the Reserve Bank of India (RBI) has made it clear that at present there will be no haste in increasing interest rates. RBI Governor Sanjay Malhotra said that the central bank is constantly monitoring the situation in West Asia, but it is too early to talk about increasing the repo rate at this time.
No signs of increasing interest rates
Sanjay Malhotra said in a statement to ET Now that if the RBI had full confidence in raising interest rates in the near future, the monetary policy stance would have been changed from neutral to restrictive. But this has not been done. He said that RBI still sticks to the policy of taking decisions based on data and is waiting for the circumstances.
Keep an eye on both inflation and growth rates
RBI recently kept the repo rate stable at 5.25 percent. However, the central bank has reduced the economic growth rate estimate for the current financial year to 6.6 percent. At the same time, retail inflation is estimated to reach 5.1 percent. The Governor said that prolonged tensions in West Asia, rising energy prices and challenges in the global supply chain could affect inflation. Therefore, RBI is reviewing the situation with full caution.
Relief from softening of crude oil prices
Sanjay Malhotra said that the prices of crude oil have softened due to positive news like reduction in tension and ceasefire in Iran-Israel conflict. Apart from this, there has also been a decline in the prices of urea, which is a matter of relief for India. He said that India’s economy has shown strength despite global uncertainties. The government and oil marketing companies have largely absorbed energy price shocks.
RBI in wait and watch mode
RBI Governor said that at present the central bank is in wait and watch mode. It is keeping an eye on the possible impact of crude oil prices, progress of monsoon and inflation. He said that it is difficult to say right now whether the impact of fuel inflation will reach other goods and services or not.
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