Tomato trouble: Economists suggest RBI to keep tight leash on inflation
inflation, given a recent significant hardening of food prices, at a meeting last week. The RBI's next monetary policy meeting is scheduled August 8-10. «The RBI asked economists their views on the recent rise in commodity prices, the CPI (Consumer Price Index-based inflation) and what they think the RBI should do,» a source aware of the developments, said.
«Most economists pointed out that the near-term CPI would likely be higher due to vegetable prices, but fourth quarter inflation could print in line with the RBI's forecast. The broad feedback was that the RBI should maintain the current stance and the „hawkish“ hold for now,» the source said. The RBI officials heard out the observations of those attending the meeting without putting forth their own views on the course of monetary policy, sources said.
An email sent to the RBI requesting comment on the matter did not receive a reply by press time. At its last monetary policy statement on June 8, the RBI's Monetary Policy Committee kept interest rates unchanged and maintained its stance of withdrawal of accommodation. While the MPC emphasised the need to ensure that inflation aligns to its 4% target, it marginally reduced its inflation forecast for the current financial year to 5.1%.
«Since the last meeting, the view on inflation has changed materially, some economists were of the view that prices of vegetables should come down in a month or so, but the larger concern has to do with spillovers. There has been a recent hardening in rice prices as well as some cereals,» another source said. With food prices having risen sharply over the past month, several economists expect July CPI inflation to print around 6.00-6.50% versus 4.81% in June.
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