On November 22, RBI Governor Shaktikanta Das underlined the central bank's focus on controlling inflation, stating monetary policy must stay vigilant against price increases while supporting growth. Das said that the MPC's measures over the last year and a half prioritized inflation over growth, narrowing the liquidity corridor, draining excess liquidity, and so on, and that these actions facilitated significant softening of headline inflation.
Das was speaking at a banking event hosted by FICCI and the Indian Banks Association in Mumbai. More crucially, a decrease in core inflation (the non-food, non-oil component of overall inflation) is remarkable, indicating that monetary policy is functioning, according to Das. Das, on the other hand, remained evasive about the direction of future rate hikes. Das stated that the central bank is totally focused on the inflation objective while evaluating various factors and determining policy.
Das highlighted that both price stability and financial stability are crucial in the economy; however, concentrating on one at the expense of the other can lead to potential stress, according to Das. Das believes that a balanced approach is required.
According to figures issued by the Ministry of Statistics and Programme Implementation on November 13, India's headline retail inflation rate declined to 4.87 percent in October, through a combination of a favorable base impact and lower prices for specific commodities. However, soaring onion prices kept inflation under control.
In September, the Consumer Price Index (CPI) inflation rate was 5.02 Percent
The current CPI inflation rate of 4.87 percent is generally in line with predictions, with economists expecting prices to rise 4.8 percent year on year in October. Over the previous two years, the RBI has waged an unremitting war against inflation. Retail inflation is expected to average 5.6 percent in the current quarter, according to the RBI. With October's reading of 4.87 percent, inflation must average 6 percent in November-December to meet the RBI's projection.
While current trends suggest that the RBI's forecast may be undershot, this may not result in any monetary policy easing by the RBI's Monetary Policy Committee (MPC), with IDFC First Bank's Sen Gupta believing that the MPC may keep the repo rate at 6.5 percent until the middle of 2024-25. The RBI's monetary policy committee will meet again on December 6-8 to deliberate on interest rates.
