The future course of monetary policy will be shaped by the evolution of growth and inflation, said Reserve Bank of India (RBI) deputy governor Michael Debabrata Patra on September 16. He was speaking at the Financial Markets Summit of the Confederation of Indian Industry, Mumbai.
"The outlook is overcast with the pandemic. Future waves may have to be navigated on the voyage beyond into a world that can live with COVID-19 without loss of life and livelihoods," said Patra. "On this journey, the course of monetary policy will be shaped by the manner in which the outlook for growth and inflation evolves," said Patra.
The MPC retained its key policy rate, repo, unchanged in the last round of monetary policy saying it will watch future data before arriving at a rate decision.
"The MPC has voted to keep the policy rate unchanged and the stance as accommodative as before. Time will tell if the call is true. Data arrivals vindicate the MPC’s stance, with inflation having moderated into the tolerance band, and growth in the first quarter in almost perfect alignment with the RBI’s forecast," Patra said.
Consumer Price Index-based Inflation (CPI) for August 2021 came in at 5.30 percent, compared with 5.59 percent in July, as food prices cooled further, especially in the case of vegetable inflation, data released by the National Statistical Office (NSO) showed on September 13.
Consumer Food Price Inflation (CFPI) for August stood at 3.11 percent compared to 3.96 percent in July. However, concerns remained with high edible oil prices, which registered an increase of 33 percent year-on-year (YoY).
"The analysis of inflation dynamics indicates that the easing of headline inflation from current levels is likely to be grudging and uneven," Patra said.
Patra said the MPC remains committed to its primary mandate of price stability. The MPC demonstrated its commitment and ability to anchor inflation expectations around the target of 4 per cent during 2016-20. Confronted with a once-in-a-century pandemic, the MPC had to tolerate higher average inflation of 6.2 per cent in 2020-21, Patra said.
"The envisaged glidepath should take inflation down to 5.7 per cent or lower in 2021-22, to below 5 per cent in 2022-23 and closer to the target of 4 per cent by 2023-24," Patra said.
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