India’s monetary policy committee will meet Thursday to discuss and prepare a report on why the central bank missed its inflation target, Governor Shaktikanta Das said.
(Bloomberg) — India’s monetary policy committee will meet Thursday to discuss and prepare a report on why the central bank missed its inflation target, Governor Shaktikanta Das said.
The Reserve Bank of India’s letter to the government will not be released to the public immediately, Das said Wednesday at a banking industry event in Mumbai. The RBI is required by law to explain why India’s price gains missed a 2% to 6% goal for three straight quarters under an inflation-targeting mandate and what steps are being taken to tame the numbers.
India RBI Off-Cycle Meet to Discuss Inflation Letter: Survey
India missed the inflation target because the war in Ukraine sent commodity prices soaring and led to supply disruptions, Das said. The RBI had kept rates at a record low of 4% for about two years during the pandemic and started raising borrowing costs from May this year amid accelerating inflation. The central bank has since delivered 190 basis points of hikes.
“We didn’t want to upset the recovery,” Das said, adding that tightening rates earlier would have slowed the economy. “In the process there was a slippage in inflation targeting, but it would have been very costly for the economy.”
The governor expects price gains to moderate and fall back within the target by the end of the fiscal year in March. The Indian rupee is one of the least misaligned among all currencies, Das said about the local currency, which has fallen about 10% this year.
Here’s more from Das:
- Inflation above 6% will hurt growth, Das said, adding that the central bank’s “constant endeavor is to keep a focused eye on inflation”
- Price stability, interest rates and financial stability need not be mutually exclusive
- India’s banking liquidity crunch is likely to be transitory as government expenditure picks up, Das said, adding that the central bank will remain vigilant about meeting liquidity requirements
- There’s no target date but the RBI aims to start retail use of digital currency in a month, he said
–With assistance from Devidutta Tripathy and Pradeep Kurup.
(Updates with more details in bullet points.)
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