Inflation outlook likely to be clouded due to volatile food prices: RBI Guv
Mumbai, December 22
The overall inflation outlook is expected to be clouded because of volatile and uncertain food prices, Reserve Bank Governor Shaktikanta Das said at the recent Monetary Policy Committee meeting.
Governor Das-headed six-member Monetary Policy Committee (MPC), which met on December 6 to 8, unanimously decided the keep the key interest rate (repo) unchanged at 6.5% citing inflationary concerns.
Vegetable prices cause for concern
A resurgence of vegetable price inflation is likely to push up food and headline inflation. We have to remain highly alert to any signs of generalisation of price impulses that may derail the ongoing process of disinflation. —Shaktikanta Das, RBI governor
“The overall inflation outlook is expected to be clouded by volatile and uncertain food prices and intermittent weather shocks,” the Governor opined, as per the minutes of the meeting released on Friday.
He said a resurgence of vegetable price inflation is likely to push up food and headline inflation.
“We have to remain highly alert to any signs of generalisation of price impulses that may derail the ongoing process of disinflation,” he said.
Das also stressed that in these circumstances, monetary policy has to be actively disinflationary and any shift in policy stance now would be premature and risky.
Deputy Governor and MPC member Michael Debabrata Patra too opined that monetary policy has to remain on high alert with a restrictive stance.
“…the monetary policy reaction function needs to assign a higher weight to inflation relative to growth in a forward-looking sense,” Patra said, while voting for a status quo on the policy rate and continuing with the stance of withdrawal of accommodation.
RBI executive director and MPC member Rajiv Ranjan said the economy is running at full steam. Growth has been resilient and continuously surprising on the upside.
“It is important to note that for the first time in Q2:2023-24, the fault lines in India’s growth story since the pandemic – tepid private investment and rural demand – seem to be gaining traction,” he said.
