HomeBusiness‘We’ll be nimble-footed on commodity prices’ - Times of India

‘We’ll be nimble-footed on commodity prices’ – Times of India

MUMBAI: The Ukraine war has upset forecasts made by the RBI in its February 2022 policy. In his first offline interaction with media after the pandemic, governor Shaktikanta Dassaid that the RBI was ahead of Western central banks in discontinuing bond purchases and that no one can forecast where commodity prices including crude oil will be.
Is the RBI worried about inflation given the rise in global commodity prices?
Wehave to be watchful about global commodity prices. Oil prices are fluctuating and it is very difficult to say which way they will move. But we will be nimble-footed and all our actions will be tailored.
Have you incorporated any government measures on the supply side while making inflation forecasts?
It is only when measures are taken that they are factored in. We have not anticipated any measures in our projections. We are taking the situation as it prevails today, domestically and globally. We have taken into account the global crude oil prices at $100 per barrel, and for fuel we have taken the pre- vailing prices while making our assessments for both growth and inflation.
Why did RBI introduce the standing deposit facility to absorb liquidity instead of using reverse repo?
The SDF gives us greater flexibility in implementing the policy objectives. It is uncollateralised and we are not constrained by the stock of liquidity that we have or we don’t have for various liquidity management operations. It is also an instrument of financial stability. It enables us to sterilise excess liquidity without the constraint of collaterals. The reverse repo will be activated when we see a need for it.

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