Headline CPI inflation is moderating but at a very slow pace, RBI governor noted in the minutes of RBI policy released on Friday. The last mile of disinflation is turning out to be gradual and protracted. Food inflation is the main factor behind the grudgingly slow pace of disinflation, Governor Shaktikanta Das stated. 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, he added.
The growth-inflation balance is moving favourably in line with our projections. Resilient growth creates space for monetary policy to focus unambiguously on inflation which remains well above the 4.0 per cent target. With persistently high food inflation, it would be in order to continue with the disinflationary policy stance that we have adopted. Any hasty action in a different direction will cause more harm than good, the Governor said. It is important that inflation is durably aligned to the target of 4.0 per cent. Price stability is the bedrock for high and sustainable growth and hence the decision to keep the policy repo rate unchanged at 6.5 per cent and to continue with the stance of withdrawal of accommodation, the RBI chief noted.
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