Unlock Premium Data: Up to 50% Off InvestingProCLAIM SALE

IMF Urges RBI to Maintain Monetary Policy Amid Inflation Concerns

EditorVenkatesh Jartarkar
Published 10/10/2023, 04:18 PM
© Reuters.
USD/JPY
-

Krishna Srinivasan from the International Monetary Fund (IMF) has recently urged the Reserve Bank of India (RBI) to sustain its current monetary policy until inflation is subdued. In a Tuesday interview with Deepshikha Sikarwar in Marrakech, Srinivasan highlighted there's no urgency to cut interest rates given the potential risks.

Srinivasan warned of the potential impact of rising oil prices on global output and inflation. A 10% rise in oil prices could cause a 0.15 basis point drop in global output and a 0.4 percentage point increase in global inflation next year, he said. This scenario presents an upside risk to inflation that central banks should consider before easing monetary policies.

The IMF official applauded the RBI's decision to strengthen monetary policy in response to inflation exceeding target levels. He stressed the need for fiscal caution and advocated for a conservative approach on both monetary and fiscal fronts. This strategy, he suggested, would help suppress inflation, establish fiscal buffers, and allow room for crucial long-term reforms during a period of potentially prolonged high-interest rates.

Turning his attention to China's economic future, Srinivasan predicted a growth rate of 5% this year, 4.2% next year, and a long-term rate of 3.4% by 2028 under a baseline scenario without reforms. He flagged China's slowing economy as a regional risk due to its significant role in global value chains, which could potentially impact four countries.

Srinivasan's comments underscore the IMF's concern about the potential risks associated with premature easing of monetary policies amid ongoing inflationary pressures. The organization's call for sustained fiscal caution comes at a time when central banks worldwide are grappling with how best to respond to these challenges while also fostering economic recovery and growth.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.