MPC Minutes: Fight against inflation is far from over, says RBI governor

RBI Governor Shaktikanta Das

Reserve Bank of India (RBI) Governor Shaktikanta Das said the central bank’s fight against inflation is far from over and the efforts will continue to bring inflation closer to the medium-term target.

“Our fight against inflation is far from over and we have to continue with our efforts to bring down inflation closer to the target over the medium term,” Das said in the RBI April minutes.

Further, he said that the projected inflation in Q4 2023-24 at 5.2 percent would still be well above the target. "Therefore, at this juncture, we have to persevere with our focus on bringing about a durable moderation in inflation and at the same time give ourselves some time to monitor the impact of our past actions," he noted.

The central bank in the April monetary policy projected CPI inflation at 5.2 percent for 2023-24, with Q1 at 5.1 percent, Q2 at 5.4 percent, Q3 at 5.4 percent and Q4 at 5.2 percent, and risks evenly balanced.

India's headline retail inflation rate crashed below the RBI's 6 percent upper-bound in March.

As per the government data, Consumer Price Index (CPI) inflation fell to 5.66 percent last month from 6.44 percent in February.

At 5.66 percent, the latest CPI inflation print is the lowest in 15 months, having come in at 5.66 percent in December 2021. It is also broadly in line with consensus estimates.

Das in the RBI minutes said both domestic as well as global factors are expected to bring about this disinflation. There is better optimism about the rabi harvest despite the recent unseasonal rains. This could significantly reduce price pressures on rabi food crops, particularly wheat.

Further, he added that prices of edible oils have moderated. The softening of global commodity prices from their peak levels a year ago is translating into lower input cost pressures for manufactured goods and services.

"These could result in some softening of core inflation going forward," he said.

Moreover, Das said the overall situation, nonetheless, remains dynamic and fast evolving. Clarity on monsoon would be available in the coming months. Milk prices may remain firm in the lean summer season on tight demand-supply balance and high fodder costs. The rising uncertainty in international crude oil prices also warrants close monitoring.