RBI Governor Das says ‘job is only half done with the fight against inflation not yet over’; Deputy Governor Patra stresses policy needs to remain in ‘brace’ mode to ensure shocks from supply demand mismatches leave no scars on the economy.
The Hindu Bureau
MUMBAI
The Monetary Policy Committee’s job was only half done in having brought inflation within the target band, Reserve Bank of India (RBI) Governor Shaktikanta Das wrote in his statement, signalling the need for policy makers to remain vigilant on price stability, the minutes of the June 68 meeting of the MPC released by the RBI on Thursday show.
“Our fight against inflation is not yet over,” Mr. Das wrote. “We need to undertake forward looking assessment of the evolving inflation growth outlook and stand ready to act,” he observed.
The MPC this month left interest rates unchanged for a second straight meeting, opting to ‘assess the cumulative impact of the 250 basis points rate increases implemented over the past year’ before taking any further monetary measures to align inflation to the target of 4%.
Observing that ‘uncertainties on the inflation outlook had not abated with the spatial and temporal distribution of mon soon rainfall needing to be closely watched in the backdrop of a likely El Nino weather pattern’, Mr. Das emphasised that ‘adverse climate events had the potential to quickly change the direction of the inflation trajectory’.
“Given the prevailing uncertainties, it is difficult to give any definitive forward guidance about our future course of action in a rate tightening cycle,” the RBI Governor added.
Cautioning that ‘pressure points from specific supply demand mismatches could impart upward pressure to the momentum of prices beyond the first quarter’, Deputy Governor Michael D. Patra stressed that monetary policy needed to remain in ‘brace’ mode to ensure any shocks did not leave scars on the economy’.
Jayanth R. Varma, one of the three external MPC members and a voice of dissent at past meetings, asserted ‘there remained significant risks to inflation and growth, and that the process of bringing inflation under control was still work in progress’.
Courtesy: The Hindu dt 23.6.2023
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