He went on to add that the central bank’s aggressive rate hikes did not have to be endless, as the recent reduction in fuel taxes and restrictions on exports of certain agricultural products could have a positive impact on containment. inflation and a geopolitical crisis linked to the Russian invasion of Ukraine. maybe over soon.
“We are committed to containing inflation. At the same time, we must keep in mind the demands of growth. This cannot be a situation where the operation is successful and the patient is dead,” the RBI chief said as quoted by the financial daily.
However, Das mentioned that RBI began tightening in April itself and indicated further rate action.
“We changed the inflation projection (in April). We have changed our position to focus on the removal of hosting. We have made the LAF (Liquidity Adjustment Facility) corridor symmetrical, giving priority to inflation. We introduced the SDF (standing deposit facility), which was a rate action. On top of that, further action on repo rates would have been too much of a shock to the market. After taking so many steps, that would have meant an 80 basis point increase,” Das told the publication.
Furthermore, the RBI boss explained that the main objective of the central bank is to contain inflation. In doing so, it cannot put growth on the back burner, and all central banks are also trying to take a similar stance with their domestic situation, keeping the growth aspect in mind. Finally, it is the economy, and it is the well-being of the people that counts. The high price is certainly against the welfare of the common man.
“When you reduce inflation, you contribute to public welfare. It’s a difficult and delicate balancing act that every central bank has to perform based on its assessment of its economy. In RBI, we will take a balanced call,” he told the Daily.