Reserve Bank of India (RBI) Deputy Governor Michael Patra on Friday said India’s retail inflation is likely to break the mandated inflation target band of 2-6% for three consecutive quarters, but is showing signs of peaking.
After touching an eight-year high of 7.79% in April, retail inflation eased marginally in May, but remained above the central bank’s tolerance band of 2-6% for the fifth consecutive month. In a span of just two months, the RBI lowered its forecast for real GDP growth from 7.8% to 7.2%.
To reduce inflationary pressures, reserve Bank of India In its latest Monetary Policy Committee review earlier this month, it decided to increase the policy repo rate by 50 basis points to 4.9%.
“The RBI Act states that if the inflation target is not met for three consecutive quarters, which is the likely scenario, the RBI shall prepare a report to the central government and in that report the reasons for its failure to achieve the inflation target,” Patra said.
Speaking at an event organized by the PHD Chamber of Commerce and Industry on Friday, Patra said key inflationary measures are showing signs of second round effects, which calls for monetary action. RBI expects any further monetary policy move to be more lenient than global tightening.
Patra said the ongoing geopolitical developments in Ukraine have challenged India’s economic prospects, making the country’s outlook bleak and highly uncertain.
High inflation has hurt the rupee and pushed it to record lows, while bond yields are rising on expectations of aggressive monetary policy tightening and a record government borrowing programme. The deputy governor said the RBI would protect the rupee from excessive volatility and would not allow any “jerky or disorderly movements”.
Describing the current level of bond yields as “uncomfortably high”, Patra said the RBI will take necessary measures to ensure the yields are compounded in a systematic manner and the government’s borrowing requirement is met smoothly.
RBI is preparing to reduce prices, but retail inflation The rate is likely to remain above the top end of its mandated target band till December, Governor Shaktikanta Das said. Article In The Times of India on Friday. Das said, “We are well on track to reduce inflation and inflation expectations. Till December, the CPI is expected to remain above the upper tolerance level. Thereafter, it will be below 6% as per our current estimates. Hoping to go.”