RBI heading to curb prevailing inflation.

In the august meeting of the committee of the apex bank, the Reserve Bank of India (RBI) hiked the repo rate by 50 basis points to 5.4 per cent, its third hike in the current financial year continuing its fight to tame stubbornly high inflation.

The decision of the six-member Monetary Policy Committee (MPC) of the RBI, which met on August 3 to Aug 5, 2022 was largely in line with expectations. Financial markets were largely unchanged at mid day as the hike was on expected lines. The central bank said it would continue its stance of withdrawal of accommodation to ensure that inflation moves close to the target of 4 per cent over the medium term, while supporting growth.

RBI has been increasing policy rates since May, with a cumulative rate hike of 140 basis points being done so far, India’s retail inflation for June inched down in June to 7.01% from 7.04% in the previous month, but it remained above the 7% mark for the third successive month and above RBI’s 2-6% tolerance level for a sixth straight month.

But the estimates for July show that India’s inflation problem seems to have bottomed out sooner than the MPC thought. At its latest meeting earlier this month, RBI retained inflation projections for FY23 at 6.7% and estimated inflation to average 7.1% in the September quarter. There is more evidence that inflation in India has peaked for now, and it is likely to slow faster than RBI’s published trajectory, coming into the target band by October, according to our latest tracking estimates. The Central government working with RBI target to curb inflation from the economy in all possible way, the objective of these steps as expected by the committee is to lower the prices of basic commodity and works toward appreciation of the rupee against dollar.

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