MUMBAI: While vegetable prices are expected to fall in the near future, the Reserve Bank of India (RBI) will closely monitor the factors influencing inflation and will take necessary measures accordingly, said RBI Governor Shaktikanta Das, as per the minutes of monetary policy committee (MPC) meeting released on Thursday.
“While the vegetable price shocks are expected to correct quickly with the arrival of fresh crops, there are risks to food and the overall inflation outlook from El Nino conditions, volatile global food prices and skewed monsoon distribution - all of which warrant close monitoring,” RBI governor said.
“Headline inflation has softened from last year’s elevated level but it still rules above the target. Our task is still not over,” he added.
A possible second-round impact of food price shocks on overall inflation prompted MPC members to opt for the status quo on the benchmark interest rate at the bi-monthly policy review earlier in the month.
“Given the likely short-term nature of the vegetable price shocks, monetary policy can look through the first-round impact of fleeting shocks on headline inflation. At the same time, we need to be ready to pre-empt any second-round impact of food price shocks on the broader inflationary pressures and risks to anchoring of inflation expectations,” he added.
RBI at its last bi-monthly MPC meeting on August 8-10 decided to keep benchmark interest rate (repo rate) unchanged at 6.5% citing inflationary concerns, especially spiralling prices of tomatoes and vegetables. All six members including MD Patra, Shashanka Bhide, Ashima Goyal, Jayanth R Varma and Rajiv Ranjan voted for status quo on policy rate, as per the minutes of the meeting released by RBI on Thursday.
As per the minutes, RBI will manage liquidity overhang using various instruments while ensuring that banking system has adequate liquidity to meet productive requirements of the economy.
“RBI’s liquidity management has been nimble and two-sided as per requirement. We will manage the liquidity overhang proactively using the various instruments at our command while ensuring that the banking system has adequate liquidity to meet productive requirements of the economy,” Das said.