Mumbai, Jun 8 (PTI) After stalling for a second consecutive consensus, the Reserve Bank on Thursday reiterated that leaving key rates and stance unchanged is “not a pivot but only a pause” and future policy actions will be purely . Rely on the data as a sustainable decline in inflation is still a long way off.
Earlier in the day, the RBI governor-led rate-setting panel MPC unanimously left the repo rate unchanged at 6.50 per cent and said they would continue to work towards rolling back the policy accommodation.
The six-member panel also reiterated the ongoing measures to bring inflation under target in a sustainable manner.
While consumer price index based inflation eased in March and April and moved into the tolerance band, headline inflation is still above the mandated target of 4 per cent and is expected to remain so during the rest of the current fiscal, Governor Shaktikanta Das Announced monetary policy.
“Therefore, close and continuous monitoring of the evolving inflation outlook is absolutely necessary, especially as the monsoon outlook and the impact of El Nino remain uncertain. We aim to achieve the inflation target of 4 per cent in a sustainable manner and not just keep inflation in a comfortable range of 2-6 per cent.
The Governor parried repeated questions from the media on what prevents the MPC and RBI from marking an ‘end to rate hikes’ or initiating a neutral or accommodative policy stance.
“It is not the axle; I repeat that this is only a pause, the second of two reviews in a row. Our future policy actions will purely depend on the evolving situation. Because headline inflation has recently declined within the target band (mainly due to cooling core inflation), we need to ensure that it is sustainable, and hence there is no room for complacency on inflation,” Das said. Said.
Pointing out that the RBI is only at a standstill and there has been no change in the neutral/accommodative stance, Das said, “Our objective is to ensure that inflation aligns with the mandated target on a sustainable basis and not in a one-off manner.
“I wish to emphasize that we will make every effort to ensure that long-term inflation expectations remain firmly entrenched. The Reserve Bank will remain vigilant and proactive in addressing emerging risks to price and financial stability .
“Therefore, given the uncertainties, we need to keep an ‘Arjuna’s eye’ on the changing inflation scenario. I wish to re-emphasize that headline inflation still remains above target and within the tolerance band Being is not enough. Going forward, we aim to achieve the target of 4 per cent.
His deputy and head of the monetary policy department at the central bank, Michael Patra, said the policy stance and inflation forecast for the year, in which he expects the price index for the year to hover around 5.1 per cent, will impact the MSP hike in paddy ( 10-12 bps) and the possible impact of El Niño on the monsoon has been taken into account.
This forecast, it may be noted, is a marginal improvement from the April forecast, when it projected prices to average 5.2 per cent during FY24.
Retail inflation fell sharply from 6.4 per cent in February to 4.7 per cent in April on favorable base effects with moderation in all three major groups. It fell to 5.67 per cent in March from 7.79 per cent in February.
The MPC retained the growth forecast for the fiscal at 6.5 per cent. The economy had grown by 7.2 per cent in the last financial year.
On growth, Das said higher rabi crop production, expected normal monsoon, sustained pick-up in services and moderation in inflation should support domestic consumption.
On the other hand, given the healthy twin balance sheets of banks and corporates, supply chain normalization and easing uncertainty, conditions are favorable for capex cycle to accelerate.
Strong government capital expenditure is also expected to fuel investment and manufacturing activity. RBI had increased the repo rate by 250 basis points cumulatively from May 2022. PTI Ben Anu Anu
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