Stubborn Food Prices Hampering Disinflation Efforts: RBI Governor Shaktikanta Das at Monetary Policy Committee

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Stubborn Food Prices Slow Retail Inflation Decline: RBI Governor Shaktikanta Das

Stubborn food prices are responsible for the slow pace of decline in overall retail inflation, according to Reserve Bank of India (RBI) Governor Shaktikanta Das. Speaking at the Monetary Policy Committee (MPC) meeting earlier this month, Das highlighted this issue while voting to maintain the policy rates, as revealed in the MPC minutes released on Friday.

The MPC voted 4:2 in favor of retaining the benchmark interest rate (repo rate) at 6.50 percent for the eighth consecutive time.

"Headline CPI inflation is moderating, but at a very slow pace, and the last mile of disinflation is turning out to be gradual and protracted," Das said in the meeting, as per the minutes. He attributed this sluggish progress primarily to food inflation, stating, "Food inflation is the main factor behind the grudgingly slow pace of disinflation. Recurring and overlapping supply-side shocks continue to play an outsized role in food inflation."

Das also mentioned that a normal monsoon might eventually ease price pressures on key food items. He noted that large favorable base effects could lead to a temporary and one-off undershoot of inflation below the target rate in the June quarter, before rising again in the third and fourth quarters of the current fiscal year.

MPC members Shashanka Bhide, Rajiv Ranjan (RBI Executive Director), Michael Debabrata Patra (RBI Deputy Governor), and Das voted to keep the policy repo rate unchanged at 6.50 percent. However, external members Ashima Goyal and Jayanth R Varma voted to reduce the policy repo rate by 25 basis points.






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