New Delhi: RBI Governor Sanjay Malhotra on Wednesday said that given the current conditions, rate cuts are off the table in the near term, changing policy stance to ‘Calibrated Tightening’.
Policy action ahead can only be a repo rate hike or a pause, depending on the evolving conditions and the outlook, he said after the three-day MPC meeting.
“The duration and extent of the rate hike cycle, therefore, would be contingent on the actual growth inflation development and outlook, especially that of underlying inflation, extent of broadening of price pressure, and speed round effects on the supply shock,” the RBI Governor said.
The central bank projected headline CPI inflation to average almost 5.8 per cent in the next three quarters.
“We also decided that headline CPI inflation is expected to average almost 5.8 per cent in the next three quarters and core inflation is projected at 4.94 per cent for this financial year,” the RBI Governor said.
The STF rate stands adjusted at 5.25 per cent, and the marginal SF, the marginal standing facility rate and the bank rate are at 5.75 per cent.
The Indian economy is expected to remain resilient, said Malhotra.
“Private consumption remained broadly resilient, with continued support from discretionary spending, and fixed investment remains strong, as evident from several related indicators,” he noted.
“Some weakness is, however, observed in segments such as non-durable goods and domestic care passenger traffic,” he added.
Service sector activity remained steady and broad-based, owing to buoyant domestic and external demand. Both manufacturing PMI and services PMI remained in expansionary zone in Q2.
After a detailed assessment of the evolving macroeconomic and financial conditions, and the outlook, the MPC voted unanimously to increase the policy repo rate by 25 basis points to 5.50 per cent.
(IANS)
