Vegetable prices lower, to fall faster from Sep: RBI governor

livemint.com:

Mumbai: Vegetable prices have started softening and will see an appreciable slowdown from September, according to Reserve bank of India governor Shaktikanta Das. Delivering the key note address at the Lalit Doshi Memorial Lecture, Das said that the outlook for cereal prices has brightened, thanks to supply side interventions. Das also said that even though core inflation remains high, the steady easing seen in the last few months indicates that monetary policy transmission is happening.

“Looking ahead, the spike in vegetable prices in July is starting to see a correction, led by tomato prices. New arrivals of tomatoes in mandis are already softening prices, coupled with proactive supply management in the case of onions. We expect to see an appreciable slowdown in vegetable inflation from September," he said.

Retail inflation, as measured by the consumer price index, had surged to a 15-month high of 7.44% in July this year from 4.87% a month ago led by vegetable prices. The slowdown in vegetable inflation, as expected by Das, will be in line with RBI’s projection which expects CPI inflation to slowdown to 5.7% in the third quarter after touching a high of 6.2% in the second quarter. RBI’s FY24 inflation projection is pegged at 5.4%.

In his speech, Das reiterated that monetary policy will overlook the first-round effects of these price shocks which has led to sharp spikes in headline inflation. He, however, assured that RBI will be on guard to ensure that second order effects in the form of generalization and persistence of inflation is not allowed to take hold. “The frequent incidences of recurring food price shocks pose a risk to anchoring of inflation expectations, which has been underway since September 2022.