Monetary policy ought to remain actively disinflationary; interest rates to remain high: RBI Guv Shaktikanta Das

Reserve Bank Governor Shaktikanta Das on Friday stressed that the monetary policy must remain actively disinflationary to ensure that the decline in inflation from its peak of 7.44 per cent in July continues smoothly. Addressing the Kautilya Economic Conclave 2023, he also said price stability and financial stability complement each other and it has been an endeavour at RBI to manage both efficiently.

Retail inflation declined to a three-month low of 5.02 per cent annually in September on account of moderation in vegetables and fuel prices, and was back within the Reserve Bank's comfort level.

The inflation based on Consumer Price Index (CPI) was 6.83 per cent in August and 7.41 per cent in September 2022. In July, inflation touched a peak of 7.44 per cent.


The Reserve Bank has raised the key policy rate (repo) by 250 basis points since May 2022 to tame inflation. However, it pressed the pause button on rate hike in February this year.

"We have maintained a pause on policy rate. So far 250 basis points rate hike is still working through the financial system. We have also appropriately fine-tuned our communication to ensure a successful transmission of the interest rate hikes," the Governor said.

He also said expansion of digital payments have made monetary policy transmission more quick and effective.

Das also stressed that the monetary policy is always challenging and there is no room for complacency.

He said interest rate will remain high at the moment, and only time will tell for how long it remains at elevated level. In the wake of the ongoing geopolitical crisis, major central banks across the world have raised their key policy rates to deal with high inflation.

The Reserve Bank too had raised the short-term benchmark lending rate (repo) cumulatively by 250 basis points since May 2022. However, it has paused its rate hike spree in February this year and retained the repo rate at 6.5 per cent.

"Interest rate will remain high at the moment, (for) how long, only time will tell," the governor said in response to a query at Kautilya Economic Conclave 2023.

In his speech, the Governor also said the global economy is now facing a triad of challenges -- inflation, slowing growth and risks to financial stability.

"First, no moderation in inflation which is getting interrupted by recurring and overlapping shocks. Second, slowing growth and that too with fresh and enhanced obstacles. And third, lurking risks of financial stability," he said.

With regard to the domestic financial sector, he said Indian banks would be able to maintain minimum capital requirements even during stress situation.

India is poised to become the new engine of global growth, Das said, and added the country is expected to clock 6.5 per cent GDP growth rate in the current fiscal ending March 2024.