Inflation sustainably moving towards RBI target enough for a rate cut: Ashima Goyal
CPI) inflation does not have to touch the Reserve Bank of India's 4% target, but sustainably move towards that mark for interest rates to be lowered, Ashima Goyal, external member of the central bank's monetary policy committee (MPC), told ET. «Headline inflation does not have to reach target but has to durably approach it for the MPC to cut rates,» Goyal said in an interview after the release of the MPC's April 3-5 minutes. «If expected headline inflation stays persistently below 4.5%, our current real repo rate would be too high.»
She said she would look for more confirmation of India's resilience to supply shocks and the anchoring of inflation expectations, while citing global risks, domestic political flux and the progress of the monsoon as uncertainties that shaped her view of a status quo on rates in April.
Over the past year, the RBI has, on several occasions, said that its aim is to drive CPI inflation back to the 4% target, and that it is not enough for the price gauge to be within the 2-6 tolerance band of the MPC. CPI inflation was at 4.85% in March.
Meanwhile, Shashanka Bhide, another external member of the MPC, said in an emailed response to ET that he expects food inflation — a persistent source of worry for the RBI for many months now — to ease in 2024. «A favourable monsoon would be a key to softening of food prices this year, particularly for the foodgrains,» Bhide said. «As far as inflation is concerned, the high rates seen last year would mean that the food inflation rates would be more
