RBI remains on guard to ensure that the second-order effects in the form of generalisation and persistence with regard to inflation are not allowed to take hold, says Reserve Bank Governor Shaktikanta Das
Reserve Bank Governor Shaktikanta Das on Tuesday said the central bank is committed to bringing down inflation to 4 per cent and will remain watchful of risks as more frequent global supply shocks can have profound implications on the management of the price situation.
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Delivering a lecture at the Delhi School of Economics, the governor said the RBI remains on guard to ensure that the second-order effects in the form of generalisation and persistence with regard to inflation are not allowed to take hold.
The central bank has been mandated by the government to keep inflation at 4 per cent with a margin of 2 per cent on either side.
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“The frequent incidences of recurring food price shocks pose a risk to the anchoring of inflation expectations, which has been underway since February 2022. We will remain watchful of this aspect also.
“The role of continued and timely supply side interventions as is being undertaken by the government assumes criticality in limiting the severity and duration of such food price shocks,” he said.
In these circumstances, he said, it is necessary to be watchful of any risk to price stability and act timely and appropriately.
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“We remained firmly focused on aligning inflation to the target of 4 per cent,” he said without giving any timeframe.
He also said that inflation, which had touched a high of 7.4 per cent in July, driven by a rise in vegetable prices, has started moderating.
