Shaktikanta said the headline inflation would peak in the fourth quarter of the current fiscal.
New Delhi: Amid the elevated hike in food prices in several parts of the country, RBI Governor Shaktikanta Das on December 8 announced that Marginal Propensity to Consume (MPC) has decided to retain inflation at 5.3% in 2021-22.
Mr Das said, “This consists of 5.1 percent in Q3, and 5.7 percent in Q4 with risk broadly balanced.”
Shaktikanta said the headline inflation would peak in the fourth quarter of the current fiscal.
He further said that CPI inflation is then expected to ease to 5 percent in Q1:2022-23 and stay at 5 percent in Q2:2022-23.
“Price stability remains the cardinal principle for monetary policy as it fosters growth and stability. Our motto is to ensure a soft landing that is well-timed,” the RBI Governor said.
The RBI has been asked by the central government to ensure that the retail inflation based on the Consumer Price Index (CPI) remains at 4 percent with a margin of 2 percent on either side.
According to RBI, cost-push pressures continue to have a noticeable effect on core inflation, though their pass-through may remain muted due to the slack in the economy.
“Over the rest of the year, inflation prints are likely to be somewhat higher as base effects turn adverse; however, it is expected that headline inflation will peak in Q4:2021-22 and soften thereafter.”
Retail inflation rose to 4.48 percent in October from 4.35 percent in September, mainly due to higher fuel and edible oil prices.
Reserve Bank Governor Shaktikanta Das headed the six-member Monetary Policy Committee (MPC) also retained the key lending rate, repo, at 4 percent, and maintained its stance as “accommodative”.
The announcement came in the context of fresh threats from the Omicron variant.
The MPC said the policy stance will remain “accommodative” until there is a sustainable recovery in the economy. An accommodative stance means the MPC is willing to either lower rates or keep them unchanged.
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