RBI Governor hints at one more rate hike in June

Mumbai: Reserve Bank of India Governor Shaktikanta Das has indicated that key policy rates will continue to go up for next few bimonthly monetary policy reviews, at least in the next meeting. He has also hinted at few other actions. He has made it clear that the steps initiated by RBI and the government will have sobering effect on inflation, going forward.

"We have entered into another phase of coordinated action between fiscal, monetary authorities on inflation. There may be few more actions from now to October on inflation," he said in an interview to a private television channel.

However, he clarified that he was not in a position to give exact number in support of his predictions.

"Broadly RBI wants to raise rates in the next few meetings. There is no one-to-one correlation between an increase in government expenditure and borrowing," Das said.

He said expectations of a rate hike are a no-brainer as inflation is a major area of concern even as economic recovery is steady and gaining further traction.

This comment comes in the backdrop of his April observations that the central bank's sequence of priority is inflation first followed by growth.

Das observed that the inflation and growth numbers are on the drawing board of the RBI almost every day and revised numbers, if any, will be given after the next monetary policy committee (MPC) meeting, scheduled from June 6 to June 8.

The Governor said liquidity conditions will be normalised over a multi-year (two-three year) time cycle even as he underscored the need to have adequate liquidity to support credit offtake.

Das said there is no correlation between an increase in government expenditure and borrowing.

It may be recalled here that that RBI had increased repo rate by 40 basis points to 4.40 per cent recently. Inflation above the six per cent upper range for four straight months prompted the central bank to raise rates in a surprise move.