Winning Bizness Desk

Mumbai. The US central bank, the Federal Reserve, has once again raised the cost of borrowing by hiking interest rates by a quarter percentage point to a range of 5.25 to 5.50 percent. This is a 22-year high rate. The Fed Reserve has made debt expensive due to steep inflation in the USA and it has targeted to bring the inflation rate up to 2 percent. But the question arises as to what effect this decision of the Fed Reserve will have on India. The meeting of the Monetary Policy Committee (MPC) of the Central Bank of India RBI is scheduled to be held from 8 to 10 August 2023. In this case, the challenges facing the RBI governor have come to the fore. On the one hand RBI have to deal with inflation and on the other hand they also have to ensure that the debt is not too expensive which damages the economy.

India also reeling with inflation

RBI Governor Shaktikanta Das will announce the decisions taken in this Monetary Policy Committee meeting before the release of retail inflation data for the month of July. But the meeting of RBI and MPC is being held when the country is witnessing a sharp rise in food inflation. The prices of green vegetables including tomatoes and ginger are putting pressure on people's pockets. The prices of rice, pulse and wheat are seeing a surge. This is the reason why the retail inflation rate in June fell to 4.81 percent which was 4.25 percent in May. Retail inflation has increased due to increase in food prices.

Policy rates was held in April-June

Earlier in the months of April and June, RBI did not change the repo rate in the MPC meeting. But the RBI governor had clearly said that the war against inflation is not over yet. And his story is proving to be true. Food inflation is going to add to RBI's woes. Despite this, experts believe that RBI will not make any change in policy rates in its MPC meeting.

RBI will hold policy rates!

According to SBI's former Chief Economist Brinda Jagirdar, heavy rains have damaged the Kharif crop in the country. Dal production is expected to remain low by 15 per cent. Our inflation rate is around 5 percent, only food inflation is a little bit of concern. But RBI will not make any change in the policy rates in the monetary policy committee meeting and the question of reducing the interest rates does not arise at the moment. On the Fed Reserve's increase in debt, he said that inflation is still very high in America and Europe. Global uncertainty remains. Food inflation is very high. India has banned the export of rice, which will also increase inflation. This is why the Fed Reserve has increased the interest rates.