We cannot risk another bout of inflation: RBI Governor Shaktikanta Das

 

The newly constituted six-member MPC left the repo rate – the key policy rate unchanged at 6.5 per cent for 20 consecutive months due to worries over higher inflation in the October policy.





At the current juncture of the economic cycle, the Reserve Bank of India (RBI) cannot risk ‘another bout of inflation’ and so there is a need to wait for more evidence of inflation aligning durably with the 4 per cent target, Governor Shaktikanta Das wrote in the minutes of the Monetary Policy Committee (MPC) held from October 7- 9.

The newly constituted six-member MPC left the repo rate – the key policy rate unchanged at 6.5 per cent for 20 consecutive months due to worries over higher inflation in the October policy. The decision to keep the policy rate steady was taken in a 5:1 majority, with MPC member Nagesh Kumar voting for a 25 basis points (bps) cut. The MPC changed the monetary policy stance to ‘neutral’, after keeping it as ‘withdrawal of accommodation’ for 28 straight months.

“At this stage of the economic cycle, having come so far, we cannot risk another bout of inflation. The best approach now would be to remain flexible and wait for more evidence of inflation aligning durably with the target,” Das, who voted for keeping the repo rate steady and changing policy stance to ‘neutral’ wrote in the minutes, released on Wednesday.

Consumer price-based inflation (CPI), or retail inflation, surged to a nine-month high of 5.49 per cent in September from 3.65 per cent in August. It is expected to remain elevated in October.

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