Inflation in India down but 'certainly not out': RBI monthly bulletin

Mumbai: Inflation in India moderated recently but it is "certainly not out", Reserve Bank of India said in its monthly bulletin on Tuesday.

The central bank said if anything, inflation has "broadened and become stubborn". "Inflation may be slightly down, but it is certainly not out. If anything, it has broadened and become stubborn, especially at its core," RBI said in the Bulletin in a section called 'State of the Economy'.

Despite moderation in global commodity markets, the central bank said climate change and the war in Ukraine are set to keep food prices at higher than pre-pandemic levels.

"Central banks may have moderated the pace of monetary policy tightening or hinted at it but they are in no mood to ease off in their fight against inflation," it added.

Meanwhile, India's retail inflation rate based on Consumer Price Index declined to 5.88 per cent in November from 6.77 per cent during the previous month, according to data released recently by the ministry of statistics. Retail inflation in India is now at an 11-month low and it declined below 6 per cent, which is in RBI's comfort zone.

The central bank RBI, in its fight against rising inflation, had already hiked the key policy rate by 225 basis points since May to 6.25 per cent to cool off domestic retail inflation that has stayed above the RBI's upper tolerance limit for over three quarters now. Raising interest rates typically cool demand in the economy, thereby putting a brake on inflation.

The latest hike was on December 7, when the Monetary Policy Committee (MPC) of the RBI increased the policy repo rate by 35 basis points, besides deciding to remain focused on the "withdrawal of accommodation" of monetary policy to ensure that inflation remains within the target going forward, while supporting economic growth.

"Growth prospects across the world are dampening. Financial markets remain nervous and are characterised by high volatility and price swings," RBI bulletin explained the rationale behind policy rate and the monetary policy stance.