Mumbai: Reserve Bank of India (RBI) Governor Shaktikanta Das said on Wednesday that the souring inflation pressure in the country is to continue because of the unusual food prices worldwide due to the geopolitical situation, which is affecting domestic markets, PTI reported.
During an off-cycle Monetary Policy Committee (MPC) meeting scheduled on May 2 to 4, the Reserve Bank announced a raise in the key repo rate by 0.40 per cent to 4.40 per cent immediately but has not tinkered with its inflation projection it aired last month. The Repo rate is the rate at which RBI lends short term money to banks.
RBI Governor Das said that the RBI's action must be seen as "growth positive" to contain the inflation and support the growth. When the retail inflation stood above the central banks' upper tolerance level for the last three months, the Russia-Ukraine crisis charged the situation worse, as inflation in most of the commodities went up globally.
RBI had projected retail inflation of 5..7 per cent this fiscal year.
Das said, "Confronted by elevated inflationary pressures that have shifted the future trajectory of inflation upwards, we have announced our intention to engage in withdrawal of accommodation to ensure that inflation remains aligned to the target," Das said.
RBI said that Consumer Price Index (CPI)-based retail inflation rose to nearly 7 per cent in March. This was mainly due to the unprecedented high global food prices, as nine out of twelve food sub-groups witnessed an increase in inflation.
Das said, "High-frequency price indicators for April indicate the persistence of food price pressures. Simultaneously, the direct impact of the increases in domestic pump prices of petroleum products, beginning the second fortnight of March, is feeding into core inflation prints and is expected to have intensified in April. Prices of edible oils may firm up further due to export restrictions by key producing countries and the loss of sunflower oil output due to the war. Elevated feed costs are translating into escalation in poultry, milk and dairy product prices," he said. He said that increased input costs also influence prices of processed food, non-food manufactured products and services.
Regarding fuel prices, international crude oil prices are staying above USD 100 per barrel, making domestic pumps increase prices to offset production charges.
Soaring inflations would affect savings, investment, competitiveness and output growth, and it will erode the purchasing power of the poor.
He concluded that RBI's recent monetary actions will strengthen and consolidate the medium-term growth prospects of the economy,"