The global economy is now facing a triad of challenges, said Reserve Bank of India Governor, Shaktikanta Das on Friday while also adding that the recent surge in crude oil prices and bond yield is a major challenge.
Speaking at the Kautilya Economic Conclave in New Delhi, the central bank chief expressed his concerns over the shocks threatening global economy.
“First, slow moderation in inflation which is getting interrupted by recurring and overlapping shocks. Second, slowing growth and that too with fresh and enhanced obstacles. And third, lurking risks of financial stability,” Das added.
“With every shock such as simultaneous surge of crude oil, bond yields and US dollar, additional dimensions of policy dilemma present themselves and hamstring the responses of central banks.”
Amid fears that the Israel-Gaza conflict may spread in the Middle East and disrupt supplies from one of the world’s top-producing regions, oil prices extended gains on Friday, rising about 1% on fears that .
Brent crude futures climbed 77 cents, or 0.8%, to $93.15 a barrel by 0042 GMT. U.S. West Texas Intermediate crude was at $90.36 a barrel, up 99 cents, or 1.1%. The front-month November contract expires on Friday.
The apex bank chief also said that India’s monetary policy must remain actively disinflationary, at the time of an uncertain outlook for food prices.
While on one hand Das expressed concerns over how financial markets have become sensitive to every piece of new information, he also highlighted that the economic activity in India remains resilient on the back of robust domestic demand.
The governor also said that the relationship between price stability and financial stability depends on the choices central banks make.
“Financial Stability measures through extraordinary interventions, unless corrected on time, can ultimately impact financial stability,” he added.
Earlier today, Finance Minister Nirmala Sitharaman too reiterated concerns over global economic shocks, adding that the world economy is witnessing several churnings.
