scorecardresearchCurrent inflation spike transitory, will ensure enough liquidity, says RBI governor

Current inflation spike transitory, will ensure enough liquidity, says RBI governor

Updated: 22 Mar 2022, 09:22 AM IST
TL;DR.

As per a Mint report, Das said that the central bank does not see inflation going up beyond 6 percent. Its expectation was that it would moderate to 4.5 percent, he said.

Das reiterated that RBI would ensure there is abundant liquidity in the market for the credit system to function normally.

Das reiterated that RBI would ensure there is abundant liquidity in the market for the credit system to function normally.

The Reserve Bank of India (RBI) governor Shaktikanta Das on March 21 said that the current spike in inflation is transitory and may moderate in months to come.

“A lot of developments are taking place. Crude oil prices touched $130 (per barrel) and then came down to $99 and today it is at $112. So, we really do not know how it is going to pan out,” Das said, as per a Mint report, at the Confederation of Indian Industry National Council Meeting.

As per the report, Das said that the central bank does not see inflation going up beyond 6 percent. Its expectation was that it would moderate to 4.5 percent, he said.

Das reiterated that RBI would ensure there is abundant liquidity in the market for the credit system to function normally.

By injecting liquidity, one enters into a Chakravyuh, a tactical military formation referred to in the epic Mahabharata. While a lot of people know how to enter it, few know how to come out, Mint quoted governor Das saying so.

“At RBI, the day we announced that we will enter that Chakravyuh, we planned an exit route also and we would come out smoothly,” Das said.

Even though Das did not say it clearly, his comments are being seen as a signal that the RBI may keep the policy rates and stance unchanged in its next MPC meet in April.

Inflation is soaring high globally owing to the ongoing Ukraine war which has shot up commodity prices.

India's retail inflation, based on the Consumer Price Index (CPI) rose to 6.07 percent in February from 6.01 percent in January, data released by the statistics ministry on March 14 showed. Retail inflation hit its fastest pace in eight months in February owing to higher prices of food and manufactured goods.

The Wholesale Price Index (WPI)-based inflation jumped to 13.11 percent in February from 12.96 percent in the previous month, data released by the commerce ministry on March 14 showed.

RBI is mandated to keep the inflation rate within the range of 2-6 percent until March 2026.

In 2001, the central government and the RBI had agreed to keep the inflation target of 2-6 percent for the next five years.

Section 45-ZA of the RBI Act, 1934 requires that the central government shall, in consultation with the RBI, determine the inflation target in terms of CPI, once every five years.

Last year, the government retained RBI’s flexible inflation target in the 2-6 percent band for the five years through 31 March 2026.

Article
Retail inflation hit its fastest pace in eight months in February owing to higher prices of food and manufactured goods.
First Published: 22 Mar 2022, 09:22 AM IST