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Informist, Tuesday, Oct. 15, 2024

 

NEW DELHI – CPI inflation will align with the Reserve Bank of India's medium-term target of 4% on a durable basis in 2025-26 (Apr-Mar), Deputy Governor Michael Patra said Monday. His speech at a central banking event in Delhi was uploaded on the RBI website Tuesday.

 

"It is projected to average 4.5% in 2024-25 before aligning with the target on a durable basis in 2025-26," Patra said. According to the RBI's Monetary Policy Report released last week, the central bank projects CPI inflation to average 4.1% in FY26.

 

On Wednesday, the RBI's Monetary Policy Committee decided unanimously to change its stance to "neutral" and to remain unambiguously focused on a durable alignment of inflation with the target, while supporting growth. This was after maintaining a "withdrawal of accommodation" stance for over two years. 

 

Headline inflation had remained above the central bank's target for 57 straight months starting October 2019, before falling below 4% in July and August this year, which Patra made note of in his speech. The Monetary Policy Committee had hiked the policy repo rate by 250 basis points to 6.50?tween May 2022 and February 2023. Patra is a member of the six-member panel, and had said at the time that the central bank wants to see off the sharp rise in headline inflation that is expected in September and October "before even considering the next move".

 

RBI Governor Shaktikanta Das has stressed that the central bank would require CPI inflation to align with the target on a durable basis before considering a rate cut. In data released Monday, CPI inflation zoomed to 5.49% on year in Septemeber from 3.65% in August, due to the statistical effect of an unfavourable base and a sequential rise in food prices.

 

"The Indian experience is unique in view of the incidence of repetitive shocks to food and fuel prices, which challenged the conduct of monetary policy," the RBI deputy governor said in his speech.

 

In India, the government sets the inflation target and the RBI achieves it, Patra added. This coordination on inflation targetting does not pose risks to financial stability, fiscal consolidation or growth, and could be used as a template by other countries which face inflation pressures from supply shocks, he said.  End

 

Reported by Aaryan Khanna

Edited by Tanima Banerjee

 

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