Food inflation behind grudgingly slow pace of disinflation: RBI Governor Das
- Slow pace of disinflation is mainly due to the elevated food inflation which has been impacted by recurring supply-side shocks
Highlights:
- In the Monetary Policy Committee (MPC) meeting, of the six-member rate setting panel, four voted to keep the policy repo rate unchanged at 6.5 per cent and policy stance as withdrawal of accommodation as higher food inflation is affecting disinflation process.
- Two external members of the MPC voted for a 25 basis points cut in the repo rate as higher interest rates could hurt growth.
- Headline consumer price-based inflation is moderating but at a very slow pace.
- Food inflation is the main factor behind the grudgingly slow pace of disinflation.
- Recurring and overlapping supply-side shocks continue to play an outsized role in food inflation
- Going forward, the baseline projections show inflation moderating to an average 4.5 per cent in 2024-25.
- In the immediate months, however, the impact of exceptionally warm summer months on output of certain perishables; a likely rabi production shortfall in some pulses and vegetables particularly potatoes and onions; and the upward revisions in milk prices, warrant close monitoring
- The domestic growth outlook for 2024-25 remains upbeat as economic activity continues to maintain momentum.
- The RBI has projected real gross domestic product (GDP) at 7.2 per cent in the current financial year.
Prelims Takeaway
- MPC
- Inflation