Food price rise keeps repo rate unchanged

Mumbai: A possible second-round impact of food price shocks on overall inflation prompted Reserve Bank Governor Shaktikanta Das and other members of the Monetary Policy Committee (MPC) to opt for the status quo on the benchmark interest rate at the bi-monthly policy review earlier in the month.

The Reserve Bank at its last bi-monthly monetary policy committee (MPC) meeting on August 8-10 decided to keep the benchmark interest rate (repo rate) unchanged at 6.5 per cent citing inflationary concerns, especially the spiralling prices of tomatoes and vegetables. All six members including M D Patra, ShashankaBhide, Ashima Goyal, Jayanth R Varma and Rajiv Ranjan voted for the status quo on policy rate, according to the minutes of the meeting released by the Reserve Bank on Thursday. The latest Consumer Price Index (CPI) data, which was released after the monetary policy review, showed that retail inflation soared to a 15-month high of 7.44 per cent in July. Also, this was for the first time in the current financial fiscal that the retail inflation breached the RBI's upper tolerance limit of 6 per cent. The Reserve Bank has been mandated by the government to keep retail inflation at 4 per cent, with a 2 per cent margin on either side. As per the minutes of the MPC meeting, Das stressed that the Reserve Bank's task of containing inflation was ‘still not over’.