A decline in core inflation pressures is critical for moderating price gains and returning them to the Reserve Bank of India’s 4 percent midpoint, a rate-setter at the Indian Monetary Policy Committee said.
The pass through of higher input cost pressures in overall prices might not be complete yet, committee external member Shashanka Bhide said, adding that rising demand “however modest and uneven” in the absence of productivity improvements would stoke prices.
The comments came after policymakers trained their eyes on elevated core inflation amid easing consumer prices. Core inflation, calculated after stripping out volatile food and energy prices, has stayed above 6 percent for 14 months in a row, while retail inflation cooled to 5.88 percent last month.
Photo: EPA-EFE
“Bringing down core inflation pressures is crucial in the overall context,” Bhide said in an interview yesterday.
Easing commodity prices and slowing demand would cool prices, but a weak rupee and the Russian invasion of Ukraine is a concern, he said.
The Reserve Bank of India has raised its policy repurchase rate by 225 basis points since May, including three half-point moves, to tame price gains.
“We need to be looking at moderate inflation on a sustained basis,” Bhide said. “We need to be moving to the target inflation rate keeping in view the impact of the cumulative policy actions and also the growth trajectory.”
His colleague Jayanth Rama Varma said in another interview that excessive rate tightening was risking India’s growth.
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