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Repo rate hike ‘no brainer’, says RBI’s Shaktikanta Das; brace for more hikes in upcoming monetary policy meets

In an interview to CNBC TV18, Das said he won’t be able to specify the rate, though he added that it would not be accurate to say that rates will be hiked to 5.15 per cent.

RBI, Shaktikanta Das, rate hike
RBI Governor says interest rate hikes in upcoming MPC meets is a no brainer.

RBI Governor Shaktikanta Das said Monday expectations of a repo rate hike by the central bank is a ‘no brainer’, adding that there will be some increase in repo rates in upcoming monetary policy meetings. In an interview to CNBC TV18, Das said he won’t be able to specify the rate, though he added that it would not be accurate to say that rates will be hiked to 5.15 per cent, ie to pre-covid levels.

RBI to revise inflation projections in June MPC meeting

Das was responding to a question on private economists projections which suggest that the RBI may hike interest rates to 5.15 per cent in the next two MPC meetings. In an off-cycle meeting this month, RBI announced a 40 basis points interest rate hike, to counter inflation, which has remained above RBI’s upper limit of 6 per cent in the last four months.

RBI Governor Das also said the Reserve Bank of India will unveil revised projections on inflation in the upcoming June MPC meeting. The last projections released in March had RBI forecast inflation at 5.7 per cent for full FY 2023. Economists, however, expect inflation to remain above 6 per cent throughout this year.

Deficit targets: RBI Guv does not expect big jump in CAD this year

In terms of current account deficit (CAD), Das said RBI will be able to manage it well, adding that it is indicated from a strong external sector wherein exports numbers have remained above $30 billion for 14 consecutive months. Imports have also picked up, and have sustained despite increase in prices, he added. Given underlying fundamental strength, strong external sector, steady FDI inflows despite some moderation in recent times, and low total external debt, I don’t expect a big jump in CAD . “We are comfortably placed to finance CAD,” he added.

Speaking about the government’s recent fiscal policy measure to cut the petrol and diesel taxes, RBI governor said it will have a ‘sobering impact’ on inflation going forward. This step is another example of coordinated action by the central government and the central bank to tackle growing inflationary concerns. Economists expect government’s measures on tax cuts on petrol and diesel to bring down consumer inflation by 20 basis points, the effect of which will spread over May and June.

Economists also project that the government’s fiscal deficit target of 6.4 per cent may overshoot to as much as 6.9 per cent after announcements on tax cuts and subsidies to tame inflation. However, Das said, it is his sense that the government may not change its fiscal deficit targets which were announced in Budget 2022. 

Read more: FM Sitharaman’s fuel tax cut will tame inflation but hurt Budget math; fiscal deficit may overshoot to 6.9%

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