Banks may not hike EMI, but inflation threat has not gone away

The Reserve Bank of India (RBI) announced its monetary policy on Friday, RBI did not make any change in the policy rates, it kept the repo rate unchanged at 6.5 percent. RBI did not make any change in the repo rate for the fourth consecutive time. Due to no change in the repo rate, there is no possibility of any change in the loan interest rates from the banks. That means there is no fear of increase in EMI of loans and no hope of getting more interest on deposits. But the Reserve Bank has expressed concern over inflation in its policy.

Announcing the policy, RBI Governor Shaktikanta Das said that fall in some kharif crops and the water level in reservoirs being lower than last year has created a challenge for inflation. The RBI Governor also said that the threat of inflation has not reduced due to global uncertainty. He said that there is a need to keep an eye on global food and energy prices in the coming days. According to the Reserve Bank Governor, the risk of inflation has increased this year due to unbalanced monsoon.

However, despite the threat of inflation, RBI did not make any change in its estimate of inflation rate for the financial year 2023-24. RBI believes that the average inflation rate can remain at 5.4 percent during 2023-24. This was also estimated in the August policy. However, the RBI Governor has increased the estimate of inflation for September quarter from 6.2 percent to 6.4 percent.

The Reserve Bank also did not make any change in its growth estimate. RBI has expressed the possibility of growth rate remaining at 6.5 percent during the financial year 2023-24. It has estimated a growth of 6.5 percent in September quarter, 6 percent in December quarter and 5.7 percent in March quarter.