Question Of Change In Stance On Interest Rate Premature Amid Inflation Goals: RBI Governor Das

The RBI's June bi-monthly report projected retail inflation at 4.5 per cent, with quarter-wise estimates of 4.9 per cent for Q1, 3.8 per cent for Q2, 4.6 per cent for Q3, and 4.5 per cent for Q4

Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday said considering a change in the central bank’s stance on interest rates is premature due to the current disparity between inflation and the 4 per cent target. In an interview with CNBC-TV 18, Das remarked, “Given the gap between current inflation and the 4 per cent target, the question of changing our stance is quite premature. We need to move towards a sustained 4 per cent CPI (retail inflation) before gaining the confidence to think about a change in stance."

He acknowledged that the journey to control inflation is progressing as expected but highlighted that achieving the final stretch towards the 4 per cent target will be the most challenging.

The RBI's June bi-monthly report projected Consumer Price Index (CPI)-based retail inflation at 4.5 per cent, with quarter-wise estimates of 4.9 per cent for Q1 (April-June), 3.8 per cent for Q2, 4.6 per cent for Q3, and 4.5 per cent for Q4. The RBI, which is mandated to maintain inflation at 4 per cent with a margin of 2 per cent on either side, primarily considers the CPI when formulating its monetary policy.

Das noted that headline inflation had softened further during March-April; however, persistent food inflation pressures have offset gains from disinflation in core and deflation in fuel groups. Despite some moderation, pulses and vegetable inflation remained firmly in double digits. Vegetable prices have seen a summer uptick following a shallow winter season correction, while the deflationary trend in fuel was mainly due to LPG price cuts in early March. Core inflation has softened for the 11th consecutive month since June 2023, with services inflation reaching a historic low and goods inflation remaining contained.

Regarding GDP, Das said that various growth drivers are playing their role effectively. He noted that the growth momentum was very strong in the fourth quarter of the last financial year and continues to be robust in the first quarter of the current fiscal year.

The RBI’s June policy also revised the GDP growth projection for the current fiscal year upwards to 7.2 per cent from 7 per cent, citing rising private consumption and a revival in rural demand. If the projected GDP growth of 7.2 per cent for 2024-25 materialises, it will mark the fourth consecutive year of growth at or above 7 per cent.