India’s monetary policy needs to stay focused on slowing inflation, Shaktikanta Das, the governor of the Reserve Bank of India said on Friday, noting the uncertain outlook for food and oil prices.
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“In the current situation, monetary policy must remain actively disinflationary to ensure that ongoing disinflation process progresses smoothly,” Das said at an event in New Delhi.
India’s monetary policy committee kept interest rates unchanged at its meeting earlier this month but signalled that the bar to reduce interest rates is high.
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“We need to see a sustained decline in inflation to reach 4% target,” said Das, adding that the central bank “stands ready to take whatever action needs to be taken.”
Alongside food prices, higher oil prices have also emerged as a risk to inflation.
Das said that increases in domestic motor fuel prices, which India’s oil marketing companies have still to announce, will matter more for inflation than global prices.
Commenting on the foreign exchange markets, Das said the central bank acts in the market to prevent excess volatility.
The RBI sold nearly $3.86 billion in August as the Indian rupee fell towards record lows.
