April inflation validates RBI’s repo rate freeze move: SBI Research – Times of India

New Delhi: Softness in the country retail inflation RBI has confirmed in April (reserve Bank of India) decided to freeze the repo rate in its first 2023 monetary policy meeting, as per SBI Research,
Retail inflation in India eased sharply to 4.7 per cent in April, or an 18-month low, from 5.7 per cent in the previous month.
“This is an optimistic number and may influence the future policy of RBI,” said the ‘Ecowrap’ report by SBI Research.
“Commodity-wise analysis shows that the weighted contribution of food and beverages declined by a maximum of 41 bps in Apr’23 mainly due to wheat/flour (other sources). Fruits with a decline in the weighted contribution of mango Inflation has also come down significantly. By 11 bps in Apr’23.”
The Reserve Bank of India, in its first monetary policy review meeting this fiscal in April, decided to keep the key benchmark interest rate – the repo rate (the rate at which the RBI lends to other banks) unchanged at 6.5 per cent. , to assess the effects of the policy rate tightening undertaken so far.
The central bank conducts six bi-monthly reviews of its monetary policy in a financial year.
Barring the recent pause, the RBI has increased the repo rate by 250 basis points cumulatively since May 2022 in the fight against inflation. Raising interest rates is a monetary policy tool that usually helps suppress demand in the economy, thereby reducing the rate of inflation.
of India retail Inflation was above the RBI’s 6 per cent target for three consecutive quarters and managed to come back to the RBI’s comfort zone only in November 2022. Core inflation has been outside the 2-6 per cent range for three consecutive quarters.
Coming back to SBI Research, it raised concerns on India’s growth front.
“It is clear that climate change poses a significant threat to India, materially affecting future development, if friction points remain unchecked in time,” the report said.
Going forward, it expects another pause in the repo rate by the RBI in the June meeting.