The Reserve Bank of India (RBI) Governor Shaktikanta Das said that the RBI is not considering a rate cut at this point amid speculations of a rate cut later this year and the focus will be on bringing inflation at a target of 4 percent.
Speaking to Bloomberg TV, the governor said, at this time, the topic of rate cut is not on our table, it’s not even under discussion. “Our focus is to remain actively disinflationary, to bring the inflation to 4 percent.”
Das further said, that inflation has moderated steadily from the high of 7.8 percent after the Russia-Ukraine war and it has come to the RBI’s target range of 2-6 percent, but the target is 4 percent.
“We are still moving towards 4 percent. Till we reach 4 percent on a durable basis, it will be premature to talk about rate cuts,” the RBI Governor said.
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Das added next year our expectation of average inflation in 2024-25 is likely to be 4.5 percent with several ups and downs unless we see clear evidence that it will sustain at that level.
In December monetary policy, the RBI sees average Consumer Price Index (CPI) inflation falling to 4 percent in the second quarter of 2024-25, even as it retained the forecast for the current financial year and held the repo rate steady at 6.5 percent.
Announcing the Monetary Policy Committee's interest rate decision on December 8, Governor Shaktikanta Das said while progress had been made on lowering inflation, the 4 percent target was yet to be reached and monetary policy had to stay the course and remain "actively disinflationary" to ensure fuller transmission and anchoring of inflation expectations.
As per RBI’s prediction, CPI inflation is projected at 5.4 percent for 2023-24, with Q3 at 5.6 percent; and Q4 at 5.2 percent.
Further, assuming a normal monsoon next year, CPI inflation for Q1 2024 -25 is projected at 5.2 percent; Q2 at 4.0 percent; and Q3 at 4.7 percent.
India's headline retail inflation rate in December accelerated to a four-month high of 5.69 percent. The Consumer Price Index (CPI) inflation print in November was 5.55 percent.
At 5.69 percent, the latest CPI inflation figure is below expectations, with economists having predicted prices likely rose 5.9 percent year-on-year in December.
While headline retail inflation rose again in December - it has now spent 51 consecutive months above the Reserve Bank of India's (RBI) medium-term target of 4 percent - it has undershot forecasts for the second month running, ensuring that it has been lower than the Indian central bank's forecast of 5.6 percent for October-December.
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To fight higher inflation, the RBI since May 2022, has raised the repo rate by 250 basis points (Bps) before pausing last year in April.
In December 2023, monetary policy, the RBI kept the repo rate unchanged for the fifth time in a row and remained focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth, also said that improved momentum in investment demand and continued business and consumer optimism would support domestic economic activity and ease supply constraints.
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