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RBI Governor: Interest Rate Change Premature Due to Inflation

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By Rediff Money Desk, New Delhi   Jul 11, 2024 18:27

RBI Governor Shaktikanta Das says changing interest rates is premature due to high inflation, with the target being 4%. Inflation is expected to decline, but the last mile to 4% will be challenging.
RBI Governor: Interest Rate Change Premature Due to Inflation
Photograph: ANI Photo
New Delhi, Jul 11 (PTI) Reserve Bank Governor Shaktikanta Das on Thursday said the question of change of stance on interest rate is quite premature given the gap between current inflation and 4 per cent target.

"Given gap between current inflation and 4 per cent target, question of change of stance is quite premature...when we move towards 4 per cent CPI (retail inflation) on a sustained basis is when we will get the confidence to think about a change in stance," Das said in an interview to CNBC-TV 18.

He said inflation journey is progressing as per expectations, but added that it is the last mile of the journey towards 4 per cent, which will be the most difficult or sticky.

Consumer Price Index (CPI)-based retail inflation has been projected at 4.5 per cent with quarter-wise projections at 4.9 per cent in Q1 (April-June), 3.8 per cent in Q2, 4.6 per cent in Q3, and 4.5 per cent in Q4, RBI had said in its June bi-monthly report.

The Reserve Bank, which has been mandated to ensure inflation remains at 4 per cent (with margin of 2 per cent on either side), mainly factors in CPI while arriving at its monetary policy.

He had said headline inflation softened further during March-April, though persisting food inflation pressures offset the gains of disinflation in core and deflation in the fuel groups.

Despite some moderation, pulses and vegetables inflation remained firmly in double digits.

Vegetable prices are experiencing a summer uptick following a shallow winter season correction. The deflationary trend in fuel was driven primarily by the LPG price cuts in early March.

Core inflation softened for the 11th consecutive month since June 2023. Services inflation moderated to a historic low and goods inflation remained contained.

With regard to GDP, Das said many drivers of growth are playing out their role and momentum of growth was very strong in fourth quarter of last financial year which continues to be strong in the first quarter.

The June policy also revised upwards the GDP growth projection for the current fiscal to 7.2 per cent from 7 per cent on rising private consumption and revival of demand in rural areas.

When the projected GDP growth of 7.2 per cent for 2024-25 materialises, it will be the fourth consecutive year with growth at or above 7 per cent.
Source: PTI
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