Reserve Bank of India (RBI) Governor Shaktikanta Das said on Friday (October 20) that interest rates will remain high. He said that interest rates will remain high for now and only time will tell for how long they will remain at this high level.
In view of the current geopolitical crisis, major central banks around the world have increased their interest rates to tackle inflation. However, to control inflation, RBI has not increased interest rates since February this year. It remains intact at 6.5%.
Earlier, since May last year, the repo rate was increased by 2.50% a total of six times. Due to this, all types of loans including home loans have become expensive. Shaktikanta Das said in Kautilya Economic Conclave 2023 that interest rates will remain high for now, only time will tell for how long.
Shaktikanta Das also emphasized that monetary policy should actively control inflation. Due to this, inflation has continued to decline from the highest level of 7.44% in July.
Das said price stability and financial stability complement each other and the RBI has tried to manage both efficiently. Retail inflation fell to a three-month low of 5.02% on an annual basis in September due to softening of vegetable and fuel prices.
Inflation based on Consumer Price Index (CPI) was 6.83% in August and 7.41% in September 2022. Inflation had reached the highest level of 7.44% in July. The Governor said, 'We have maintained the ban on interest rates. So far the growth of 2.50% is still working through the financial system.
Das said that through digital payments, the impact of monetary policy is becoming visible rapidly and effectively. The Governor said that the global economy is currently facing three challenges: inflation, slow growth and risks to financial stability.
With regard to the domestic financial sector, he said Indian banks will be able to maintain minimum capital requirements even during stress situations. Das said India is set to become the new engine of global growth and the country's GDP growth rate is expected to be 6.5% in the current financial year ending March 2024.