RBI Governor Shaktikanta Das Discusses Inflation and Policy Rates
New Delhi, India – August 22: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) held its fiftieth meeting from August 6 to 8. RBI Governor Shaktikanta Das highlighted the challenges faced by the central bank, emphasizing the decision to keep the policy repo rate unchanged at 6.5%.
Inflation Concerns
Governor Das noted that while inflation is gradually decreasing, it remains uneven and slow. He stressed the importance of maintaining inflation expectations and avoiding spillovers from food inflation to core inflation. Das stated, “The best contribution that monetary policy can make for sustainable growth is to maintain price stability.”
Deputy Governor’s View
Dr. Michael Debabrata Patra, Deputy Governor of RBI, expressed concern over the widening gap between headline and food inflation. He emphasized the need to align inflation with the target to support the Indian economy.
Other MPC Members’ Opinions
Dr. Rajiv Ranjan highlighted the resilience of the domestic economy but pointed out higher risks to inflation compared to growth. Prof. Jayanth R. Varma expressed concerns about the restrictive nature of current monetary policy and its impact on growth. Dr. Ashima Goyal advocated for a 25 basis points cut in the repo rate, citing global uncertainties and improved liquidity. Dr. Shashanka Bhide supported keeping the policy repo rate unchanged and emphasized the need to focus on withdrawing accommodation to align inflation with the target.
Conclusion
The MPC decided to keep the policy repo rate unchanged at 6.5%, continuing the stance of withdrawal of accommodation to ensure inflation progressively aligns with the target.
Doubts Revealed
RBI -: RBI stands for Reserve Bank of India. It is the central bank of India, which means it controls the money supply and interest rates in the country.
Governor -: The Governor of the RBI is the person in charge of the Reserve Bank of India. Shaktikanta Das is the current Governor.
Inflation -: Inflation means the increase in prices of goods and services over time. When inflation is high, things become more expensive.
Policy Rates -: Policy rates are interest rates set by the RBI to control the money supply in the economy. They affect how much it costs to borrow money.
Monetary Policy Committee -: The Monetary Policy Committee (MPC) is a group of people who decide on the policy rates and other important financial decisions for the country.
Repo Rate -: The repo rate is the interest rate at which the RBI lends money to commercial banks. Keeping it unchanged means the rate stays the same.
Food Inflation -: Food inflation refers to the increase in prices of food items. When food inflation is high, it means food becomes more expensive.
Deputy Governor -: The Deputy Governor is a high-ranking official in the RBI who assists the Governor. Dr. Michael Debabrata Patra is one of the Deputy Governors.
Restrictive Monetary Policy -: A restrictive monetary policy means the RBI is trying to reduce the amount of money in the economy to control inflation. This can make borrowing money more expensive.
