Repo rate may rise again if price spike spreads from food items says Shaktikant Das

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New Delhi: The Monetary Policy Committee of the Reserve Bank of India (RBI) has not made any change in the repo rate for three times but it may increase in the coming days. RBI Governor Shaktikant Das has indicated this. They say that if the rise in food prices has an impact on overall inflation, then the repo rate may increase. They say that there is a need to be prepared to foresee and deal with the risk in order to control the apprehension that there is an increase in inflation and to put pressure on food prices even further.

According to the minutes of the MPC meeting held from August 8 to 10, released on Thursday, Das opted to keep the policy rate repo unchanged due to apprehensions about the impact of a rise in food prices on inflation. In this meeting, the repo rate was retained at 6.5 per cent, citing inflationary concerns. All the six members, including MD Patra, Shashank Bhide, Ashima Goyal, Jayant R Verma and Rajeev Ranjan, voted in favor of keeping status quo on the policy rate. Das said, “Our work to check inflation is not over yet. In view of the volatility in vegetable prices, monetary policy may see the impact of its initial impact on retail inflation.

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inflation target

RBI has got the responsibility of keeping the retail inflation in the range of 2 to 6 percent. The central bank aims to keep it at 4 per cent. “At the same time, there is a need to anticipate and respond to risks in order to contain further broader inflationary pressures from food prices and further inflationary expectations,” the governor said. RBI Deputy Governor Patra said that for the MPC’s objective of bringing down inflation to the prescribed target, it is important to ensure a sustained reduction in core inflation.

The MPC of RBI has not made any change in the repo rate in its last three meetings. Earlier, the repo rate was increased by 2.5% from May last year. The repo rate has increased to 6.5 percent. Due to this, all types of loans including home loans have become costlier. Recently, the price of vegetables especially has increased a lot. Due to this, retail inflation reached the highest level of 15 months in July. Due to this, the expectations of reduction in the repo rate have also reduced.
(with input from language)

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