RBI Inflation: The Reserve Bank started increasing the repo rate by holding an emergency meeting in May last year. After that, it was decided to increase the interest rates in the meeting of the Monetary Policy Committee for 6 consecutive times.
Last month, the rate of Retail Inflation March 2023 again came under the 6 percent range of the Reserve Bank after two months. During the months of January and February, the rate of retail inflation in the country was more than 6 percent.
In this regard, the Reserve Bank believes that the measures taken in the Monetary Policy (RBI Monetary Policy) have helped in controlling inflation. However, the Central Bank also believes that unless it is reduced below 4 percent, its path is not going to be easy. The Reserve Bank has said these things in an article published in the latest bulletin (RBI Bulletin April 2023).
Inflation had become uncontrollable
The Central Government has given a target to the Reserve Bank to keep the Consumer Price Index (CPI) based inflation rate at 4 percent. Along with this, a scope has also been given for the inflation rate to be up or down by two percent. Retail inflation has been a cause of trouble for more than a year. Barring the last two months of last year, the rate of retail inflation remained more than 6 percent throughout the year.
Policy is determined by retail inflation
After coming down below 6 per cent in November and December 2022, retail inflation once again crossed the range in January 2023. Even in February, the retail inflation was more than 6 percent, but in March it became somewhat soft again. The Reserve Bank decides the monetary policy on the basis of retail inflation rate. Whether the repo rate will increase or keep it constant depends to a large extent on retail inflation.
Starting May 2022
To control retail inflation, the Reserve Bank started increasing the repo rate by holding an emergency meeting in May last year. After that, it was decided to increase the interest rates in the meeting of the Monetary Policy Committee for 6 consecutive times. During this, the Reserve Bank increased the repo rate by 250 basis points i.e. 2.50 percent.
Break after 10 months
In the month of March, the rate of retail inflation was 5.66 percent. This was the lowest retail inflation in the last 15 months. After this, when the meeting of the Monetary Policy Committee of the Reserve Bank was held in April, it was decided to keep the repo rate constant. In this way, after a gap of about 10 months, there was a break on the repo rate cycle. The Reserve Bank says that the rate of retail inflation has been controlled by continuously increasing the repo rate i.e. by tightening the monetary policy.
Economic growth will help
In the article, the Central Bank said that the rate of retail inflation had reached the highest level of 7.8 percent in April 2022. After that from May 2022, he started increasing the repo rate. The result of this is that the inflation rate has come down to 5.66 percent in March 2023. The Reserve Bank says that due to the stability of prices being durable, economic growth will also be helped.
