Inflation remains high, underscoring the need for monetary policy to firmly anchor inflation expectations, according to an article published in the Reserve Bank’s latest Bulletin on Friday.
Retail inflation broke its three-month downtrend and rose to 7 percent in August, mainly on higher food prices.
CPI-based inflation, which the RBI uses for its monetary policy, has been above its 6 percent ceiling for eight consecutive months.
The loss of momentum in global economic activity could take the edge off inflation, which remains high, according to the article by a team led by RBI Deputy Governor Michael Debabrata Patra.
The Indian economy is poised to shake off the modest slowdown in growth momentum in the first quarter of 2022-23, it said.
Overall demand is stable and poised to continue growing as the festival season begins. Domestic financial conditions continue to support growth stimulus, the article said.
“Inflation remains elevated and above tolerance levels, underscoring the need for monetary policy to contain second-order effects and firmly anchor inflation expectations,” the authors said.
However, the central bank said the opinions expressed in the article were those of the authors and did not represent the views of the Reserve Bank of India (RBI).
Based on the recommendations of the Monetary Policy Committee (MPC) chaired by the RBI governor, the central bank has already hiked the key interest rate on short-term loans by 140 basis points in three tranches since May this year in a bid to curb inflation.
The next MPC meeting is scheduled for September 28-30, 2022.
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