Food price spikes may return: MPC

livemint.com:

MUMBAI: The Reserve Bank of India’s rate-setting committee expressed concerns about a possible resurgence in food inflation ahead, minutes of the panel’s 6-8 December meeting showed. The unease prompted the Monetary Policy Committee’s (MPC) six members to keep interest rates steady in a unanimous decision. This is the fifth consecutive time that the repo rate, which was last raised by 25 bps to 6.5% at the meeting of February 2023, has remained at that level.

Repo rate refers to the interest rate at which the central bank loans money to commercial banks. In the minutes, RBI governor Shaktikanta Das was quoted as saying that monetary policy has to be actively disinflationary, and any shift in stance at this point would be premature and risky. “In the immediate months of November and December, a resurgence of vegetable price inflation is likely to push up food and headline inflation.

We have to remain highly alert to any signs of generalization of price impulses that may derail the ongoing process of disinflation," said Das. RBI deputy governor Michael Patra said that households are already wary. While they expect inflation to remain unchanged three months ahead, they are less sure about this prognosis than they were two months ago.

“Over the year ahead, however, they are more sure than in the past that inflation will likely rise. Consumers too reveal more pessimism about inflation a year ahead than when they were surveyed in September. Consequently, monetary policy has to remain on high alert with a restrictive stance," said Patra.