Amid the ongoing geopolitical crisis, Reserve Bank of India Governor Shaktikanta Das on Friday said interest rate will remain high for the moment and only time will tell for how long it will be so. 

The RBI will remain extra vigilant and keep 'Arjun's eye' to ensure a sustained decline in inflation, Das said, while reiterating that monetary policy must remain ‘actively disinflationary’.

Like other central banks which have raised their key policy rates, the RBI has cumulatively hiked the repo rate by 250 basis points since May 2022 to tame inflation which touched a high of 7.44% this July. However, the central bank has paused its rate hike since February and retained the repo rate at 6.5%.

“Interest rate will remain high...how long they will remain high I think only time and the way the world is evolving will tell,” Das said while responding to a question during Kautilya Economic Conclave 2023, organised by the Finance Ministry and the Institute of Economic Growth. Retail inflation though slipped to a 14-month low of 5% in September, but uncertainty looms over low interest rate.

On the sidelines of the Conclave, Das said the RBI remains very focused on the inflation dynamics. “We need to see sustained decline in inflation...our objective is to reach 4%," he said.

On elevated crude oil prices in the international market, Das said: “What matters is the pump price in India”. Pump price of petrol and diesel is important as far as inflation in India is concerned, he added.

Responding to queries on impact of crisis in Middle East, the RBI Governor said in the last fortnight, US bond yields have risen, which has wider implications for other economies. Crude oil prices have also gone up. 

“Some of these uncertainties were there, but they have become more pronounced in some sense. What is different in the context of India — we are impacted by whatever is happening all over, no doubt on that,” he said.

"Our macroeconomic fundamentals continue to be sound. Eventually, in these uncertain times, what matters is how strong is your macroeconomic fundamentals, how strong is your financial sector. I think on both these parameters India is well placed," Das said.

He also said the dollar index has become strong and bond yields in the US have reached an all-time high. 

“But if you look at the volatility of the Indian rupee, from January 1 till now, the rupee depreciation is 0.6% whereas on the other side, the appreciation of the US dollar for the same period has been 3%. So, rupee is stable. We are there in the forex market to prevent excessive volatility,” the Governor added.