India’s central bank to remain flexible while aiming to tame inflation, governor says

2022.07.09 12:56

India’s central bank will continue calibrating policy to preserve and foster macroeconomic stability while bringing down inflation and will remain flexible in its approach, Governor Shaktikanta Das said on Saturday.

The global economy is going through an uncertain time and concerns around growth and inflation persist, but the central bank believes that there could be some respite from rising prices in the coming months, Das told an economic forum in New Delhi.

“Our current assessment is that inflation may ease gradually in the second half” of the fiscal year to March, given a favourable supply outlook and “high frequency indicators pointing to resilience of the recovery” during the three months to June, he said.

Retail inflation eased marginally in May, after touching an eight-year high of 7.79% in April, but remained above the central bank’s tolerance band of 2% to 6% for a fifth month.

The Reserve Bank of India raised its inflation projection for this fiscal year to 6.7% from 5.7% earlier. Das said it will likely remain above the bank’ upper tolerance band in the first three quarters of the financial year.

The governor also highlighted the need for enhanced policy coordination and dialogue among countries at a time when global factors play a key role in domestic inflation dynamics.

The bank’s raised rates by 50 basis points in June after a 40-bp increase in May, to prevent growing inflationary pressure from becoming broad-based.

Further hikes are likely in coming months, economists predict.