India’s central bank need not rush to ease rates unless sure of a stable low-inflation regime, said a rate-setter at India’s monetary policy panel.
It is important for the Reserve Bank of India to achieve the inflation target of 4% in a sustainable way, said Shashanka Bhide, an external member of the monetary policy panel in an emailed interview. “It is best to avoid frequent changes in direction. That would be disruptive to achieving both growth and inflation goals.”
Bhide’s comments echo that of Governor Shaktikanta Das that a pivot can be considered when price-gains settle near the mid-point of its 2%-6% range on a durable basis. But his colleague in the MPC, Jayanth Varma criticized the RBI of being non-transparent about its policy intent by retaining its withdrawal of accommodation stance.
“I believe the stance should be consistent with the rate decision and its rationale,” Bhide said.
Retail inflation fell to a 25-month low of 4.25% in May, but the central bank sees it climbing back near 5% from June on a weaker monsoon. The June-September rains, which waters half of the country’s farm land, arrived a few days late and has been 28% below normal since beginning of the season, according to the India Meteorological Department.
Despite the recent moderation in inflation print, price rise in a number of consumption items exceeded 6% reflecting the risks, said Bhide, an expert in agriculture economy, underlining the need to be cautious on inflation trajectory.
“A weak monsoon would adversely affect agricultural output and prices,” he said.
Source Name:Economic Times