Mumbai (Maharashtra) [India], April 6 : Explaining the rationale behind the central bank's decisions on policy rate, Reserve Bank of India Governor Shaktikanta Das has said the recent high-frequency indicators suggested some improvement in global economic activity, while the outlook is now tempered by additional downside risks from financial stability concerns.
Announcing the outcome of three-day deliberations of the Monetary Policy Committee on Thursday, the RBI Governor said, "Headline inflation is moderating but remains well above the targets of central banks."
The RBI Governor said these developments have led to heightened volatility in global financial markets as reflected in sizeable two-way movements in bond yields, fall in equity markets and the US dollar shedding its gains from its peak of September 2022.
Amidst this volatility, he said the banking and non-banking financial service sectors in India remained healthy and financial markets evolved in an orderly manner.
"Economic activity remains resilient and real GDP growth is expected to have been 7.0 per cent in 2022-23. Consumer price inflation, however, has increased since December 2022, driven by price pressures in cereals, milk and fruits. Core inflation remains elevated. Looking ahead, headline inflation is projected to moderate in 2023-24," he said.
Shaktikanta Das said the monetary policy actions taken since May 2022 were still working through the system. "Accordingly, the MPC decided to keep the policy rate unchanged to assess the progress made so far, while closely monitoring the evolving inflation outlook," he said.
The Governor said the MPC would not hesitate to take further action as might be required in its future meetings. "To recapitulate the actions taken so far, we have increased the policy repo rate cumulatively by 250 bps in the last 11 months starting May 2022," Shaktikanta Das said.
He said it was now necessary to evaluate the cumulative impact of these rate hikes. "Under these circumstances, we have to be extremely prudent in our actions. We have always been very watchful and have adopted a calibrated and balanced approach and will continue to do so," he added.
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