India May 23(IM): The Reserve Bank of Indias monetary policy committee MPC would continue to hike interest rates to quell inflationary pressures but it would be premature to say that the repo rate would be hiked to pre Covid levels, RBI governor Shaktikanta Das said on May 23.
Expectation of a rate hike is a no brainer, Das said in an interview to CNBC TV18 channel. There will be some increase in the repo rate. By how much, I will not be able to tell now but to say that it will be hiked to 5.15 percent now will not be accurate.
The market was right in thinking that the MPC wants to raise rates in the next meeting on June 8, he said. The central bank also wants to remove the overhang of liquidity in the system over two to three years, he said.
Das comments came after the MPC surprised everyone on May 4 by hiking the repo rate by 40 basis points to 4.4 percent, citing inflationary pressures. One basis point is one hundredth of a percentage point. Repo is the rate at which the RBI lends short term funds to banks.
The off cycle rate move was seen as an effort by the central bank to curb soaring inflation, which has stubbornly stayed above its comfort zone in the last few months, raising concerns among policymakers.
In April, the retail inflation surged to 7.79 percent, the highest since May 2014. At 7.79 percent, the Consumer Price Index inflation print for April was 84 basis points higher than the March number of 6.95 percent, data released on May 12 by the ministry of statistics and programme implementation showed.
Das said that India had entered into another phase of coordinated fiscal and monetary action to quell inflation. The recently announced fiscal measures will have a sobering impact on inflation going forward, Das said.
The government on May 21 cut the central excise duty on petrol by Rs 8 a litre and on diesel by Rs 6. It also waived customs duty on the import of some raw materials, including coking coal and ferronickel, used by the steel industry. To improve availability, it hiked the duty on iron ore exports by up to 50 percent and a few steel intermediaries to 15 percent.
source : Moneycontrol