Fight against inflation will be dogged, prolonged: RBI article

The fight against inflation will be dogged and prolonged, given the long and variable lags with which monetary policy operates, an RBI article said.

“Yet, if we succeed, we will entrench India’s prospects as one of the fastest growing economies of the world enjoying a negative inflation differential with the rest of the world,” according to the article on the state of economy authored by a team lead by Reserve Bank of India (RBI) Deputy Governor Michael Debabrata Patra.

It said this happy outcome will re-enthuse foreign investors, stabilise markets and secure financial stability on an enduring basis.

Retail inflation spiked to 7.41 per cent in September, remaining above RBI’s upper tolerance level of 6 per cent for the ninth month in a row.

With inflation remaining above the 6 per cent level, RBI, now, will have to give a report to the central government giving reasons for failure to contain inflation at 4 per cent with a bias of 2 per cent on either side.

“While the persistence of headline CPI (Consumer Price Index) inflation above the tolerance band for three consecutive quarters (up to September) will trigger mandated accountability processes, monetary policy remains focussed on realigning inflation with the target,” the article said.

The article has been published in the RBI’s October bulletin.

The central bank said the views expressed in the article are those of the authors and do not represent its views.

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