It's a pause, not a pivot: RBI Governor on decision to hold interest rate | Sports-Games
Summary
Governor Shaktikanta Das on Thursday said its a pause and not a pivot about the Reserve Banks surprise decision to hold the key policy rate at 6.50 per cent after hiking the rate six times since May last year.Cumulatively since last May, Reserve Bank of India (RBI) has increased the interest rate by 250 basis points to tackle inflation and the Monetary Policy Committees decision on Thursday to leave the repo rate unchanged came as a surprise.RBI Deputy Governor Michael Patra, who heads the monetary policy department at the central bank, said, this pause is valid till 10 am on June 8, 2023 when the Governor will announce the next policy review.While leaving the key rate unchanged, MPC members were unanimous in their view that it is time they reviewed the outcome of the past six consecutive rate hikes since May last year.If I have to characterise todays monetary policy in just one line, it would be its a pause and not a pivot, Das told reporters at the customary post-policy presser.The surprise move also comes against the backdrop of inflation still remaining high amid rising external risks, including concerns over the health of the global financial system.Weve said that MPC stands ready to act should the situation so warrant in the future meetings. Therefore, the effective increase in the policy rate has been in the order of 320 bps.Given this, MPC felt it necessary to assess the cumulative impact of our actions taken so far. Finally, given the overall macroeconomic and financial stability, our priority continues to be price stability, Das said.Further, Das said MPC stands ready to act should the situation so warrant in the future meetings.To a question on how long this pause will remain, Das cited cricket and said, it depends on how each ball is played... were watchful of how it is playing out since the monetary policy is always forward looking.We are watchful of the impact of the action taken so far as so many external developments taking place both with regard to inflation and with regard to growth and so many other things. So, well be watchful of the overall situation and the monetary policy being forward looking, well take further action whenever we think appropriate, he noted.Patra said that in the fight against inflation, interest rates alone have not been used. Theyve been used in conjunction with supply-side measures because alongside demand pressures, there have been multiple shocks, overlapping shocks on the supply-side.And as in a game of chess, we keep on thinking about our forward moves and we will act when the time arises, Patra said.To a query on whether the surprise pause in policy action reflects the decoupling of the monetary policy from that of the US Fed, Das said, with regard to coupling with the US Fed, you know, it has never been so.