RBI Monetary Policy: MPC projects headline inflation at 6.8% in Q3 2021

RBI Governor Shaktikanta Das has said that inflation is likely to remain elevated with some relief in winter months from prices of vegetables and bumper Kharif arrival at his Monetary Policy Committee (MPC) announcement on December 4.

Governor Das said that CPI inflation is expected to be 6.8% for Q3 adding that it is projected to decrease to 5.8% for Q4.

For H1FY22, Das said the inflation is projected to be in the range of 4.6% to 5.2% with risks staying broadly balanced.

Das said that, "This (inflation) constraints the MPC, at the current juncture, from using the space available to act in support of growth."

The MPC decided to keep interest rates unchanged, and maintained the policy stance at "accommodative", Reserve Bank of India (RBI) Governor Shaktikanta Das said. The RBI's MPC made the decision after a three-day meeting that began on December 2.

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The RBI Governor further said that signs of recovery far from being broad-based and are dependent on sustained policy support. "Small window is available for proactive supply management strategies to break the inflation spiral being fueled by supply chain disruptions. Further efforts are necessary to mitigate supply site driven inflation pressures," Das said, adding that MPC will monitor all threats to price stability.

Experts had earlier said that the stubborn retail inflation, which has remained above the comfort level of the RBI of around 4 percent, will refrain the central bank from reducing the interest rate.

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India's retail inflation for October was at a 77-month high at 7.61 percent against 7.27 percent in September. The inflation based on the Consumer Price Index (CPI) was 4.62 percent for the same period a year ago.

CPI inflation has remained in excess of 6 percent, except in March this year.

Core inflation also rose to 5.7 percent in October, from 5.5 percent in September, led by a number of items such as clothing and footwear, housing, health, and recreation and amusement.

After the previous MPC meeting on October 9, the RBI had kept repo rates unchanged at 4 percent and reverse repo rate at 3.35 percent. Das said the stance has also been maintained as "accommodative" for "as long as required" for growth.