The Reserve bank of India (RBI), in an article in August Bulletin, said the monetary policy needs to take a cautious approach if food inflation persists, as such shocks may not be transitory and could spill over into generalised inflation.
The decision to leave interest rates unchanged and the subsequent remarks from Fed Chairman Jerome Powell have sparked a sea change in market sentiment.
Moody's Investors Service expects global growth to continue to slow in 2023 over a cumulative monetary policy tightening by various central banks.
The central bank Governor cleared the air that another interest rate hike is imminent. The two-day monetary policy meeting in the US will start on September 20.
Indonesia's central bank has also moved to curb inflation, including by promoting the use of local currency settlement in cross-border trade and investment
Das noted that the move is expected to give a fillip to bank lending to the real estate sector.
Reserve Bank of India’s six-member Monetary Policy Committee decision to keep the repo rate unchanged at four per cent is a step in the right direction, especially when it is borne in mind that inflation is now on the rise.
In fact, markets were hoping for measures from the Reserve Bank that could solve the crisis in the banking and financial sectors; but the announcement of extension of moratorium further dented the sentiment.
The RBI further said the sharp reduction in international crude oil prices, if sustained, could improve the country’s terms of trade.
As per the newly effective interest rates, FDs between 7-45 days will get receive 4 per cent instead of 4.5 per cent earlier.
