RBI Governor Shaktikanta Das warned of rising global uncertainties and urged financial markets and institutions to be the first line of defense.
Interest rates will remain high, and any change will depend on global developments, Das said on Friday, highlighting new uncertainties in the global economy since the latest Monetary Policy review two weeks ago.
Pointing to the recent surge in US bond yields to a record high, combined with policy announcements from central banks and mixed data points from around the world, Das asserted that while central banks must be agile, the first line of defense must be stock exchanges and financial institutions. Some existing uncertainties, such as rising crude oil prices and persistent volatility in financial markets, have been exacerbated, he noted.
Asked about the prospects of “higher for longer” interest rates at the Kautilya Economic Conclave, the Governor said central banks will have to be extra vigilant about the growth-inflation dynamics while keeping a close eye on inflation.
“How these economies are going to play out next year in terms of their growth, because if growth slows, that also creates other challenges for financial stability,” Das said. “So I would not venture to say how long these interest rates will be high, but I’m not giving forward guidance,” he noted.
Interest rate cuts in India are not on the agenda at the moment, he emphasized. “Interest rates will remain high, how long they will remain high, I think only time and the way the world is evolving, will tell,” Das underlined.