RBI committed to bring down inflation to 4%; watchful of price risks: Governor Das

Reserve Bank Chief Shaktikanta Das asserted on Tuesday that the central bank possesses a dedication to curbing inflation to a marked objective of 4 percent. Furthermore, it will uphold a vigilant posture in overseeing potential perils, especially as frequent worldwide supply interruptions can significantly impact price administration.

While addressing an audience at the Delhi School of Economics, Shaktikanta Das conveyed that the RBI remains watchful, with the goal of thwarting the emergence of secondary outcomes, such as the widespread and enduring presence of inflation. The central bank has received instructions from the government to maintain inflation at 4 percent, with a buffer of 2 percent on both sides.

The recurrent instances of repeating food price upheavals represent a threat to the anchoring of inflation expectations, which has been in progress since February 2022. We will continue to be observant of this aspect as well.

The function of ongoing and timely supply-side interventions, as currently being executed by the government, takes on pivotal significance in constraining the severity and duration of such food price upheavals," he remarked.

In these circumstances, he commented that it becomes imperative to be vigilant regarding any peril to price stability and respond promptly and fittingly.

"We have remained steadfastly focused on harmonizing inflation with the 4 percent target," he added, refraining from specifying a particular timeframe.

He also remarked that inflation, which had touched a zenith of 7.4 percent in July, driven by an escalation in vegetable prices, has initiated a trend of moderation.

Back in June, the Reserve Bank of India marginally adjusted its inflation prognosis for the ongoing fiscal year to 5.1 percent.

In April, the Reserve Bank assessed retail inflation, based on the consumer price index (CPI), at 5.2 percent for the fiscal year 2023-24. CPI inflation underwent a notable drop to 4.7 percent in April 2023, down from 6.4 percent in February, owing to advantageous base effects, with a softening trend being observed across all three primary categories.

Governor Shaktikanta Das, in his address on Tuesday, emphasized the unwavering commitment of the central bank to reducing inflation to the designated 4 percent threshold. He further emphasized the crucial role of ongoing supply-side interventions undertaken by the government in managing the impact of recurrent food price fluctuations.

Speaking at the Delhi School of Economics, Das articulated the central bank's vigilance in averting secondary consequences, particularly the spread and persistence of inflation. The government has mandated the central bank to maintain inflation at 4 percent, with a permissible range of 2 percent on either side.

The frequent instances of recurring food price shocks pose a threat to anchoring inflation expectations, a process initiated in February 2022. This aspect will continue to be closely monitored.

Das underscored the criticality of timely supply-side interventions by the government in mitigating the severity and duration of such food price shocks in the prevailing circumstances.

In light of these conditions, he stressed the necessity of remaining vigilant regarding any threats to price stability and taking timely and appropriate action.

He affirmed the unwavering commitment to aligning inflation with the 4 percent target without specifying a specific timeline.

Furthermore, he noted the moderation of inflation, which had reached a peak of 7.4 percent in July due to a surge in vegetable prices.

In June, the Reserve Bank of India made a slight adjustment to its inflation projection for the current fiscal year, reducing it to 5.1 percent.

In April, the Reserve Bank estimated retail inflation, as measured by the consumer price index (CPI), at 5.2 percent for the fiscal year 2023-24. CPI inflation witnessed a sharp decline to 4.7 percent in April 2023, down from 6.4 percent in February, primarily due to favorable base effects, with a softening trend observed across all three major categories.