Reserve Bank of India
Majority members of the Reserve Bank of India's (RBI) monetary policy committee (MPC) reiterated caution on persisting high inflation, arguing for a closer watch, minutes of the October meeting showed.
The MPC, in the policy review, had retained the key policy rate repo at 6.5 percent, reiterating willingness to act against inflation.
"Going forward, inflation outlook continues to be beset with uncertainties,
especially from adverse weather events, the playout of El Niño conditions, uncertainties in global food and energy prices and volatility in global financial markets," RBI Governor Shaktikanta Das said in October Minutes.
"Inflation prints for September and October will need to be monitored carefully to look out for the moderation that our projections anticipate," RBI Deputy Governor Michael Debabrata Patra said.
In September, India’s headline retail inflation rate fell to 5.02 percent in September, aided by a steep plunge in the vegetable prices.
At 5.02 percent, the Consumer Price Index (CPI) inflation print for September is 181 basis points lower than 6.83 percent a month before.
The RBI's latest forecasts, released on October 6, had implied an inflation reading of 4.8-5 percent for last month. Speaking at the annual meeting of the World Bank Group and the International Monetary Fund (IMF) minutes after the release of the CPI data, RBI Governor Shaktikanta Das said the latest inflation print is exactly in line with the central bank projections.
Although the headline inflation has returned to the Indian central bank's tolerance range of 2-6 percent, it has now completed four full years above the medium-term target of 4 percent.
Das said that the moderation in inflation in September would also be aided by the sharp reduction in household LPG prices in end-August.
"The projections suggest that throughout much of Q3:2023-24, food inflation pressures may not see a sustained easing, but ample buffer stocks of food grains, softening edible oil prices, and government’s proactive supply side interventions are expected to keep check on unusual price spikes of key food items," Governor added in Minutes.
In October monetary policy, the CPI inflation is projected at 5.4 percent for 2023-24, with Q2 at 6.4 percent, Q3 at 5.6 percent and Q4 at 5.2 percent, with risks evenly balanced. The CPI inflation for Q1 of 2024-25 is projected at 5.2 percent.
Earlier today, Das at Kautilya Economic Conclave 2023 said the central bank will keep a closer watch on the changing dynamics of inflation.
“We remain extra vigilant on the evolving inflation dynamics,” Das said in the plenary address at Kautilya Economic Conclave 2023.
He further said in Minutes that the heightened inflationary pressures during July-August 2023, following the spike in vegetables prices, has once again shown that headline inflation remains vulnerable to recurring and overlapping food price shocks.
Adverse weather events – unseasonal rains, skewed monsoon rainfall and unprecedented heat waves – have been major sources of food inflation pressures in recent years, he added.
RBI MPC minutes show inflation fears are far from over - Moneycontrol
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