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India 4% inflation focus may not signal 'higher for longer' rates: Jayanth Varma, Ashima Goyal

India's inflation breached the rate-setting panel's 6% upper tolerance limit in five of the last 12 months, but stayed between 4% and 6% in the other seven, including easing to 5% in September after two months of food cost-driven spikes.

October 23, 2023 / 13:11 IST
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India 4% inflation focus may not signal 'higher for longer' rates: Jayanth Varma, Ashima Goyal
India 4% inflation focus may not signal 'higher for longer' rates: Jayanth Varma, Ashima Goyal

India's monetary policy committee's (MPC) decision to reinforce the 4% retail inflation target follows inflation returning to its 2%-6% comfort zone, but does not necessarily signal rates will remain higher for longer, two external members of the committee told Reuters.

India's inflation breached the rate-setting panel's 6% upper tolerance limit in five of the last 12 months, but stayed between 4% and 6% in the other seven, including easing to 5% in September after two months of food cost-driven spikes.

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"A few quarters back, the urgent task before the MPC was to bring inflation inside the tolerance band. That phase is now behind us apart from a few transient spikes above the band," panel member Jayanth Varma told Reuters by email late on Friday.

"The focus, therefore, naturally shifts to the next stage of bringing the inflation to the target level," said Varma, adding that there is no ambiguity in the eventual inflation goal of 4%.