RBI Governor Asserts: “Battle Against Inflation Isn’t Over, Only Halfway Accomplished,” Remarks Monetary Policy Committee

Image Source: PTI Monetary Policy Committee: ‘Fight against inflation not over, job only half done,’ says RBI Governor

According to Shaktikanta Das, the governor of the Reserve Bank of India, bringing India’s inflation levels back to a manageable range is akin to completing a task that is halfway done. He emphasizes the need for consistently aligning inflation figures around 4.0 percent in the fight against rising prices.

Currently, India’s retail inflation exceeds the ideal target of 4%.

“Our job is only half done, having brought inflation within the target band (4-6 per cent). Our fight against inflation is not yet over,” stated the RBI Governor in the minutes of the latest monetary policy meeting held from June 6-8.

For the second consecutive time, the RBI has unanimously decided to maintain the repo rate at 6.5%, which is the interest rate at which the RBI lends to other banks.

The slowdown in growth, currently at an 18-month low, along with the potential for further decline, has prompted the central bank to once again hold the key interest rate.

In an effort to combat inflation, the RBI has increased the repo rate by 250 basis points annually since May 2022, with the exception of April. This brings the rate to 6.5%.

“Given the prevailing uncertainties, it is difficult to provide any definitive forward guidance regarding our future course of action in a rate tightening cycle,” he added, emphasizing the need for the RBI to remain agile and flexible in managing liquidity in the banking system.

The RBI Governor noted that the global economy has maintained its growth momentum and the overall level of uncertainty is gradually decreasing.

“However, headwinds to the global growth outlook persist, with ongoing geopolitical conflicts. While headline inflation is decreasing in various countries, it remains high and above their respective targets. Central banks are closely monitoring the evolving conditions,” he stated.

The RBI Governor also highlighted the decrease in inflation in India, improvement in the external sector outlook, and the healthy state of banks’ and corporations’ balance sheets.

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