Continued monetary policy tightening necessary in India: RBI MPC member

Business Thursday 22/December/2022 08:06 AM
Continued monetary policy tightening necessary in India: RBI MPC member

New Delhi: Continued monetary policy tightening is needed to achieve moderation in the inflationary pressures, Reserve Bank of India's Monetary Policy Committee member Shashanka Bhide said during the latest policy meeting held this month.

"Keeping in view the need to achieve moderation in the inflationary pressures in a sustained manner, continuing with the monetary policy tightening measures is necessary at this stage," Bhide had said, as per the minutes of the meeting. With overall domestic growth showing signs of resilience, the adverse global macroeconomic conditions require that the domestic inflation rate is at moderate levels, within the tolerance band of the inflation target on a sustained basis, said Bhide, who is also the honorary senior advisor, National Council of Applied Economic Research, Delhi.

The 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 had 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.

The committee also decided to remain focused on the withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.

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.

Further, India's wholesale inflation based on the Wholesale Price Index for the month of November was at 5.85 per cent (provisional), against the previous month's 8.39 per cent, official data showed.

In the last two consecutive months, India's wholesale inflation has been in single digit. Till September, for 18 months on the trot, India's wholesale inflation was in double digits.