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Should the Reserve Bank continue to blindly follow the Federal Reserve in raising interest rates, or should it “pause and think”. Soumya Kanti Ghosh, Chief Advisor of the country’s largest government bank SBI, has advised the Reserve Bank in this regard. He has said that the Reserve Bank may continue to follow the US central bank Federal Reserve “exactly” in terms of interest rate hikes.
Ghosh said he does not see an end to the Federal Reserve’s rate hike cycle in the near term and it is time for the RBI to think differently. He said, “My point is, can we follow the Federal Reserve exactly? At some point, we need to stop and think whether the earlier rate hikes (by RBI) have trickled down in the system. I don’t see the end of the Federal Reserve cycle anytime soon. He can increase the rates three or more times.
He was speaking at a session organized by the India Chamber of Commerce here. The country’s inflation rises to 6.52 per cent in January 2023, well above the RBI’s tolerable level of six per cent. Earlier, in 10 of the 12 months of 2022, inflation was more than six percent.
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