Inflation in India: RBI Governor Shaktikanta Das feels the worse is over but it's still bad 

Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday stated that CPI-based inflation has peaked and will moderate, but is at unacceptably high levels.

At a media briefing post announcing RBI monetary policy committee (MPC) decision, Das also mentioned that current account deficit will be manageable and that the central bank has the ability to manage the gap.

The MPC, in its August meeting, said that the Consumer Price Index (CPI) based inflation, which RBI factors in while fixing its benchmark rate, stood at 7.01 per cent in June. Retail inflation has been ruling above the RBI's comfort level of 6 per cent since January this year.

Inflation based on the Wholesale Price Index (WPI) remained in double-digit for 15 months in a row. The WPI reading was at 15.18 per cent in June.

Das also mentioned that the Indian economy is an island of stability despite two Black Swan events (outbreak of COVID-19 pandemic and Russia-Ukraine war) and multiple shocks.

Earlier today, the MPC raised the benchmark lending rate by 50 basis points to 5.40 per cent to tame inflation.

With the latest hike, the repo rate or the short term lending rate at which banks borrow has crossed the pre-pandemic level of 5.15 per cent.

This is the third consecutive rate hike after a 40 basis points in May and 50 basis points increase in June. In all, the RBI has raised benchmark rate by 1.40 per cent since May this year.

All the six members of the Monetary Policy Committee (MPC), headed by RBI Governor Shaktikanta Das, unanimously voted for the rate hike.

The Consumer Price Index (CPI) based inflation, which RBI factors in while fixing its benchmark rate, stood at 7.01 per cent in June. Retail inflation has been ruling above the RBI's comfort level of 6 per cent since January this year.

Ranen Banerjee, Leader, Economic Advisory Services, PwC India, said, "The MPC has delivered the expected 50 basis point hike in the repo rate and not a higher one following the recent aggressive increases from the US Fed and BoE...The increase in the repo rates will take some time to transmit in actual lending rates and therefore impact on growth momentum in the current financial year is going to be limited and hence a real GDP growth of around 7% should be achievable.  Whether it will be 7.2% or lower will depend on how the geopolitical tensions in Ukraine and over Taiwan play out over the next few months.”

The latest RBI action follows the Bank of England raising rate by 50 basis points, the biggest hike in 27 years, to 1.75 per cent.

Last month, the US Federal Reserve effected its second consecutive 0.75 percentage point interest rate increase, taking its benchmark rate to a range of 2.25-2.5 per cent.