• Reserve Bank of India (RBI) governor said the recent increase in oil prices could impact private consumption adversely during the meeting of the Monetary Policy Committee (MPC) held earlier this month.
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• On June 6, the six­ member MPC unanimously decided to raise the repo rate by 25 basis points to 6.25%, citing inflation fanned by a sharp increase in oil prices. 
• The recent increase in oil prices, by impacting disposable incomes, may have some adverse impact on private consumption. 
• Private consumption expenditure contributed almost 60% to the gross domestic product last fiscal.
• RBI has increased the inflation projection for the fourth quarter of the current financial year to 4.7% during the June meeting as compared to the previous meeting held in April.
• According to the governor, while there are several uncertainties of the inflation path but a normal monsoon, by keeping food inflation benign, could act as a mitigating factor.

• Repo rate is used by monetary authorities to control inflation.
• In the event of inflation, central banks increase repo rate as this acts as a disincentive for banks to borrow from the central bank. This ultimately reduces the money supply in the economy and thus helps in arresting inflation.
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• MPC is entrusted with the task of fixing the benchmark policy interest rate (repo rate) to contain inflation within the specified target level.

The Hindu, Indian Economy.