Rate easing may have to wait, highlights RBI in its latest bulletin
Easing of rates by the Reserve Bank of India might still have to wait going by the hawkish tone in an assessment of the economy published by the RBI economists in its latest monthly bulletin.
“A modest easing of headline inflation in the reading for April 2024 confirms the expectation that an uneven and lagged pace of alignment with the target is underway” wrote the Reserve Bank of India deputy governor Michael Patra and his team in their assessment of the economy published in the latest monthly Bulletin.
Significantly the statement seems to suggest that full alignment with the target may still have to wait. Hence easing of rates. The views expressed are not that of the Reserve Bank of India.
The Reserve Bank has raised the benchmark policy rates by 250 basis points (one bps is 0.01 percent) since May 2022 as inflation surged way beyond the central bank’s comfort band of 2-6 percent. But the inflation numbers are slowly aligning to the target of 4 per cent. Yet the central bank has its concerns as food inflation continues to be high.
Headline inflation, as measured by yearly changes in the consumer price index or CPI, moderated to 4.8 per cent in April 2024 from 4.9 per cent in March largely due to base effect. Food inflation which accounts for more than 40 per cent of the share in consumer inflation edged up to 7.9 per cent in April from 7.7 per cent in March.
As for the economic activity, there is a growing optimism that India is on the cusp of a long-awaited economic take-off. “ Recent indicators are
