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Indian Inflation 'Unacceptably And Uncomfortably' High: Das

He also said that on the domestic front, though inflation has moderated and plateaued since its recent peak of April 2022, it remains unacceptably and uncomfortably high

Photo Credit : Reuters

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Sustained high inflation, unless addressed effectively, could result in unanchoring of inflation expectations and their second-order effects, said Reserve Bank of India Governor, Shaktikanta Das in minutes of the Monetary Policy Committee's (MPC) recent meeting published on Friday. 

Das said that this necessitates an appropriate monetary policy response to prevent upward drift in inflation from the target rate. 

"I am of the view that at this juncture a 50 bps increase in the repo rate is necessary and, therefore, vote accordingly. I also voted to remain focused on the withdrawal of accommodation," he said

Das said that RBI's monetary and liquidity actions have been aimed at ensuring continued macroeconomic and financial stability that could set the foundation for a high growth trajectory over the medium term. 

"We will continue with the ‘whatever it takes approach, given the new set of challenges and very high uncertainties that we are confronted with," he said. 

Talking about inflation, he said that our actions today are tailored towards first bringing the CPI inflation within the target band and then taking it close to the target of 4.0 per cent over the medium term while supporting growth. 

"The sequence of our policy measures is expected to strengthen monetary policy credibility and anchor inflation expectations. Our actions would continue to be calibrated, measured and nimble depending upon the unfolding dynamics of inflation and economic activity," the RBI Governor added. 

Since the last MPC meeting in June 2022, there has been a considerable slowdown in the global economy, which is now expected to grow only by 3.2 per cent in 2022 according to the International Monetary Fund (IMF), Das reiterated. 

At the same time, global inflation has hardened further and is projected to remain elevated and persist for longer at around 6.6 per cent for advanced economies (AEs) and 9.5 per cent for emerging market and developing economies (EMDEs) (IMF, July 2022). 

"This has triggered a synchronised and aggressive monetary tightening by central banks across the world, leading to tighter global financial conditions after almost a decade of accommodative policies," he said. 

He also said that on the domestic front, though inflation has moderated and plateaued since its recent peak of April 2022, it remains unacceptably and uncomfortably high. 

The high level of inflation continues to be broad-based with 13 out of 23 CPI sub-groups/groups, comprising close to 60 per cent of the CPI basket, registering more than 6 per cent inflation in June 2022. 

"Going forward, though there are early indications that inflation might have peaked in April, significant uncertainties remain on account of adverse global spillovers coming from simmering geopolitical tensions, volatile global commodity prices and financial markets," he said.