NEW DELHI: The Monetary Policy Committee (MPC) expressed concerns over recurring food price shocks hindering the ongoing disinflation process, stating that core disinflation has remained steady due to past monetary policy actions.
However, as per MPC minutes, headline inflation continues to experience volatility, potentially impacting inflation expectations. The MPC highlighted risks to the inflation outlook, including unpredictable domestic food inflation, volatile crude oil prices, and financial market instability in the international environment. To sustain the path of disinflation, the MPC emphasised the need to closely monitor any signs of food price pressures spreading and eroding gains made in easing core inflation.
Reserve Bank of India (RBI) Governor Shaktikanta Das cautioned that though food inflation has receded from its peak in July, it remains high. The overall inflation outlook is expected to be clouded by volatile food prices and intermittent weather shocks. In the coming months, a resurgence of vegetable price inflation may push up food and headline inflation, requiring continuous monitoring to prevent a derailment of the disinflation process.
“Inflation is moderating, but we are still quite a distance away from our goal of reaching 4% CPI on a durable basis. The projected inflation (4.7%) in Q3 of next year, i.e., one year from now, is perilously close to 5%. In these circumstances, monetary policy has to be actively disinflationary. Any shift in policy stance now would be premature and risky. Further, with past rate hikes still working through the economy, it would be desirable to closely monitor their full play out,” Das said. Dr. Shashanka Bhide, a member of the MPC, highlighted concerns regarding uneven performance in both production and demand.
RBI minutes Inflation outlook