RBI's Monetary Policy Contingent on 4% Inflation Stability: Governor Das

Governor Shaktikanta Das emphasized the Reserve Bank of India's (RBI) cautious approach towards potential policy adjustments, asserting that any further actions would be contingent upon maintaining headline inflation at the targeted 4 percent level. Stressing the central bank's primary goal of aligning inflation with the 4 percent target, Das clarified that no alterations in rates could be considered until there is a firm assurance of it remaining at or below this threshold.

During the customary post-rate decision interaction with reporters, Das highlighted the RBI's projections, indicating a consumer price inflation forecast of 3.8 percent for the December quarter, with a subsequent uptick touching 5 percent. He reiterated the necessity for inflation to not just reach but sustain at the 4 percent mark for any contemplation of additional monetary policy measures.

Responding to queries regarding the timing of a potential rate cut, Das acknowledged a shift within the rate-setting panel, where two members dissented against maintaining rates, indicating a growing sentiment favoring a rate cut to stimulate growth. However, he underscored the challenge of achieving the 4 percent inflation target as the ultimate hurdle, emphasizing the importance of aligning with this objective.

Deputy Governor Michael Patra provided insights into the growth outlook, citing a lower forecast for real GDP expansion in FY25 due to a high base effect from FY24. Despite this, he noted a robust growth momentum within the economy. Patra outlined the primary risks to growth stemming from global geopolitical factors and domestic issues such as extreme weather events.

Addressing concerns about the RBI's policy linkage with the US Federal Reserve's decisions, Das maintained a balanced stance, indicating that RBI's rate adjustments may not necessarily mirror those of the US Fed. He expressed confidence in the RBI's capacity to manage increased fund flows resulting from the country's inclusion in J P Morgan bond indices, citing past instances of effective management.

Regarding queries about potential additions to the forex intervention toolkit, as mentioned in the annual report, Das refrained from elaborating further. Similarly, he avoided specific responses concerning expectations from the new government, its fiscal consolidation stance amidst coalition politics, or reactions to the election outcome.