RBI MPC Meet: Reserve Bank of India On Wednesday, December 8, Governor Shaktikanta Das said that considering the bright prospects of the Rabi crop, with the arrival of winters, the prices of vegetables are expected to see a seasonal improvement. His statement came during the announcement of the Monetary Policy Committee meeting that day. He also said that the inflation trajectory is likely to be in line with RBI’s earlier estimates, and price pressures may persist in the immediate term.
“Headline CPI inflation rises to 4.5 per cent from 4.3 per cent in October”
After falling sharply between September, June and September. This rise is mainly
Unseasonal rains reflected a spurt in vegetable prices in parts of
country,” Das said during the meeting.
“International energy prices have kept domestic LPG and kerosene from hardening”
Prices rose for almost three quarters, leading to fuel inflation rising to 14.3 per cent in October. The continuation of high core inflation (i.e., CPI inflation excluding food and fuel) since June 2020 is an area of policy concern, given input cost pressures that could be transmitted to faster retail inflation as demand strengthens. In this context, a reduction in excise duty and VAT on petrol and diesel will lead to a permanent reduction in inflation through direct impact as well as indirect effects driven through fuel and transportation costs.
The inflation trajectory, going forward, will be conditioned by many
factor, RBI said in a statement later.
“The buoyancy in vegetable prices due to heavy rains in October and November is likely to reverse with the arrival of winter. Rabi sowing is progressing well and is likely to exceed last year’s acreage. The recent proactive supply side interventions by the government continue to prevent the pass-through of the increase in international edible oil prices to domestic retail inflation,” the statement said.
Of late, tomato prices have touched Rs 140 per kg in the southern states, amid incessant rains in the region.
Referring to the reduction in excise duty by the Center on petrol and diesel, the bank said that the crude oil prices have improved significantly in the recent past. The bank said cost-push pressures from higher industrial raw material prices, transportation costs, and global logistics and supply chain constraints are impacting core inflation.
“The slowdown in the economy is mitigating the impact of rising input costs and output prices. Taking all these factors into account, CPI inflation for 2021-22 is estimated at 5.3 per cent; 5.1 percent in Q3; Q4: 5.7 per cent in 2021-22, the risk broadly balanced. Q1: CPI inflation is estimated at 5.0 per cent for 2022-23 and 5.0 per cent for the second Q2,” it said in the statement.
“Our monetary policy stance is primarily in line with evolving domestic inflation and growth dynamics. Nevertheless, impending changes in monetary policy settings by systemically important global central banks are bringing new challenges to domestic macro financial stability in the form of spillovers. In such a scenario, domestic macro fundamentals need to be resilient with appropriate policy stances and actions and strong buffers. In this context, a well-established nominal anchor provided by the flexible inflation targeting framework has given monetary policy the credibility and flexibility to effectively address growth concerns during the pandemic,” Shaktikanta Das told MPC briefing. said during
“In the current situation, it is important to keep inflation aligned with the target while focusing on a strong growth recovery. At the same time, the Reserve Bank remains aware of the need to ensure that financial positions are rebalanced in a systematic, calibrated and well-telegraphed manner while preventing the creation of financial stability risks. Price stability remains a core principle for monetary policy as it promotes growth and stability. Our aim is to ensure a soft landing which is on time.”
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