Monetary policy will remain watchful, nimble-footed, calibrated: RBI governor

RBI Governor Shaktikanta Das

India's monetary policy will “remain watchful, nimble-footed and calibrated” going forward, Reserve Bank of India (RBI) Governor Shaktikanta Das said on September 5.

“The RBI remains committed to support the market with two-way operations, as warranted, in line with the revised liquidity management framework,” Das said at an event organised by the Fixed Income Money Market and Derivatives Association of India (FIMMDA). “The RBI will also strive to ensure stable money market conditions, the smooth conduct of the primary auctions in G-secs (government securities) and facilitate the orderly evolution of the yield curve.”

The RBI’s rate-setting Monetary Policy Committee (MPC) is currently striving to quell rising price pressures in the economy, while balancing growth. The rate-setting panel has hiked the key policy repo rate by a total of 140 basis points since early May and is expected to raise the rate again as it seeks to curb inflation.

Retail inflation, as measured by the Consumer Price Index (CPI) fell to a five-month low of 6.71 percent in July. Inflation has ruled above the RBI’s medium-term target of 4 percent for 34 consecutive months and seven straight months outside the central bank’s 2-6 percent tolerance range.

As such, the central bank is only two months away from failing to meet its inflation mandate, which is deemed to occur when the average inflation is outside the 2-6 percent tolerance range for three straight quarters. If the MPC fails to meet its inflation mandate, it will have to soon draft its response to the government, citing reasons for the failure to meet the target and spelling out ways to bring inflation back within the target level.

Das reiterated today that with the consequent easing of imported inflation pressures, India’s CPI inflation has peaked in April this year. While the incoming monthly inflation prints in the near-term could be “bumpy,” it is expected to moderate in the second half of FY23 and move within the tolerance band in Jan-March, he said.