The Reserve Bank of India has raised inflation aim to 5.4% from 5.1% forecast in June policy. The central bank today also held the benchmark rate steady for a third straight time at 6.5% and also retained stance by five-to-one vote to focus on withdrawal of accommodation. El Nino weather conditions and global food prices need to be watched closely and these developments warrant a heighetned vigil, RBI Governor and MPC Chair Shaktikanta Das said while announcing the policy decisions.
The MPC remains resolute in commitment to align inflation to 4% target, he added. The global economy continues to face daunting challenges of elevated inflation, geopolitical tensions and extreme weather conditions, Das said. Vegetable prices may see significant correction after few months.
Uncertainties remain on domestic food prices due to weather disruptions and El Nino threats. Das, who had last year said, the central bank will keep ‘Arjuna’s eyes’ on price pressure to bring the inflation print back within the tolerance ceiling of 6% and then to the 4% target, today said the policymakers will have to stand in readiness to go beyond keeping an Arjuna's eye to deploying policy instruments, if necessary. «Bringing headline inflation within the tolerance band is not enough.
We need to remain firmly focused on aligning inflation to the target of 4%,» the governor said. For the last fiscal year, inflation was pegged at 6.5%. India’s retail inflation quickened to 4.81% in June after hitting a 25-month low of 4.25% in May on an annual basis, driven by food prices, which accounts for nearly half of the overall consumer price basket.
Read more on economictimes.indiatimes.com