ADVERTISEMENT
RBI governor Das says inflation must slow to 4% for rate cutThe inflation rate in July eased below the RBI’s target for the first time since 2019, but the central bank expects it to climb back again from September.
Bloomberg
Last Updated IST
<div class="paragraphs"><p>Reserve Bank of India  Governor Shaktikanta Das.</p></div>

Reserve Bank of India Governor Shaktikanta Das.

Credit: Reuters Photo

By Anup Roy

ADVERTISEMENT

India’s inflation must show signs of settling around the central bank’s target of 4 per cent on a sustainable basis before a rate cut can be considered, Reserve Bank of India (RBI) Governor Shaktikanta Das said.

“We are completely focused on inflation, we are keeping a close eye on growth,” Das said in an interview with NDTV television channel on Tuesday. “We want inflation to slow and be around 4 per cent and be there,” he added.

The inflation rate in July eased below the RBI’s target for the first time since 2019, but the central bank expects it to climb back again from September.

The RBI has kept its policy rate unchanged for over 18 months. In its policy review earlier this month, it paused because of the effects of persistent food inflation on overall prices.

It will be a “serious policy mistake” to cut rates based on the one-off dip in inflation, Das said. Decisions on rates have to be data-dependent and the central bank does not “want to confuse people giving guidance,” the governor said.

There’s growing debate about whether it’s appropriate for the RBI to target an inflation measure that includes food since interest rates won’t have a direct effect on their prices. Das said leaving out food inflation will dent policy credibility as it has a weight of 46 per cent in the overall consumer price index.

ADVERTISEMENT
(Published 21 August 2024, 12:51 IST)