RBI could announce another repo rate hike on April 6
RBI could announce another repo rate hike on April 6
It is not so much the concerns about growth or the dangers to financial stability post the global banking crisis, but rather persistent inflation that is becoming a major headache for the Reserve Bank of India (RBI) Governor Shaktikanta Das as he, along with the other members of the Monetary Policy Committee (MPC), looks to decide on interest rates tomorrow.
Despite some softening in the headline number, there has been no clear trend towards a sustained fall in the retail inflation or Consumer Price Index (CPI) basket.
There is a consensus in the market that the MPC will go for one more repo rate hike of 25 basis points to 6.75 per cent and then there will be a pause. But the way the inflation trajectory is panning out, there could be more hikes. But there is also another camp that says the full transmission of rate hikes hasn’t happened yet and RBI should wait and watch before making more hikes in the benchmark rates.
Two MPC members — Ashima Goyal, professor at the Indira Gandhi Institute of Development Research and Professor Jayant R. Varma, professor at the Indian Institute of Management Ahmedabad — are already rooting for prioritising growth.
An analysis of the CPI index for the month of February reveals that 10 out of 25 items in the inflation basket have a year-on-year (YoY) rate of over 6 per cent, which exceeds the RBI’s upper band. The RBI has a mandate to keep the inflation below 6 per cent with a target of 4 per cent with +-2 per cent.
These items with a 6 per cent YoY inflation rate include cereals, milk, fruits, prepaid meals, clothing, footwear, household goods, healthcare, and personal care. The increase in cereal prices is very sticky after the Russia-Ukraine conflict. Similarly, the milk prices are going up because of the increase in fodder prices.
Dr. Shashanka Bhide, one of the MPC members, has also highlighted this fact in the February policy, that sustained moderation in headline inflation can only be expected when most major components of the index fall below the 6 per cent mark.
Before putting brakes on rate hikes, it’s clear that the RBI will pay close attention to a long-term trend of falling inflation.
Continuing the achievement of the journey of effectiveness and credibility of more than 10 years in the career of journalism, as a woman journalist, I am Serving as the founder, promoter and editor of DiaryTimes with the trust and support of all. My credible coverage may not have given a big shape to the numbers, but my journey presents articles that make you aware of the exact and meaningful situations of Himachal’s politics, ground issues related to the public, business, tourism and the difficult geographical conditions of the state and financial awareness. DiaryTimes, full of the experience of my precise editorial expertise, is awakening the flame of credible journalism among all of you, so that the eternal flame of meaningful change can be lit in the life of the people of the state and the atrocities being committed against the people can be brought to the fore, I am motivated for that. If even a small change comes with the power of my journalism and the whole world becomes a witness to that issues, then I will consider myself fortunate.
