Inflation to fall below 6% in Q4, RBI Deputy Governor says

22
2
Inflation to fall below 6% in Q4, RBI Deputy Governor says

Inflation is expected to fall below 6 percent in the January-March quarter, as RBI Deputy Governor Michael Debabrata Patra expressed confidence that the monetary policy will be more moderate than the rest of the world.

The key policy rate was raised by 90 basis points in May and June to 4.9 percent to a high level of inflation, mainly due to supply disruptions on account of the ongoing Russia-Ukraine war.

Patra said there were indications that inflation may be peaking at a session on 'Geo-Political Spill-overs and Indian Economy' at PHDCCI here.

Inflation is expected to fall back into the threshold in the fourth quarter of 2022 -- 23 and fall even further in the next year. In this world of global inflation crisis, it is possible to look at the change in inflation rather than the level, according to the Deputy Governor, who oversees the monetary policy department in the RBI.

He is a member of the Monetary Policy Committee MPC, which decides the key policy rate repo. The RBI has tasked it to make sure inflation stays at 4 percent with a two percent deviation on either side. Retail inflation based on Consumer Price Index CPI decreased to 7.04 per cent in May from 7.8 percent in April, but it remained above the RBI's threshold of 6 percent for the fifth month in a row. Against this backdrop, it is our hope that required monetary policy actions in India will be more moderate than elsewhere in the world and that we will be able to bring inflation back to target within a two-year time span. India would have tamed the inflation crisis if the monsoon brought a more benign outlook on food prices, he said.

Observing that the decline in inflation will be very grudging, Patra said India will succeed in bending down the future trajectory of inflation and thereby winning the war. Earlier this month, the Reserve Bank raised the benchmark repo rate by a sharp 0.50 percent to 4.90 percent to keep pace with spiraling prices. The repo rate was hiked by 0.40 percent after the off-cycle meeting on May 4.

The inflation projection for the current fiscal year was raised by the RBI to 6.7 percent from its earlier forecast of 5.7 percent.

The next MPC meeting is scheduled to take place August 2 - 4, 2022.