India RBI Rejects Inflation Fears, Signals Slower Normalization
Inflation in India has peaked and will ease going forward, says RBI Deputy Governor Michael Patra.
(Bloomberg) -- A top policy maker said India’s inflation has peaked, dismissing concerns over the central bank’s dovish outlook when several peers are turning to tightening.
“Inflation is a case of statistical effects in India,” Reserve Bank of India Deputy Governor Michael Patra said in a virtual address to the Asia Economic Dialogue 2022. “If you look at the momentum, it is actually declining.”
The rebuttal follows several economists expressing doubts about the RBI’s benign inflation forecast even though oil prices are surging and demand returns as pandemic curbs are eased. While inflation last month breached the RBI’s 6% tolerance limit, Patra said it was the peak -- signaling policy makers had room to keep borrowing costs lower for longer to support the economy.
“We have the headroom to support growth and we will do so because we are dealing with lost output, lost livelihood,” he said. “The RBI reserves the right to choose its time to normalize.”
The central bank’s rate-setting panel, of which Patra is a member, held interest rates steady earlier this month and vowed to keep monetary policy accommodative for as long as necessary to ensure a durable economic recovery.
The decision was based on RBI’s inflation outlook that sees price growth easing to 4.5% in the fiscal year beginning April, from 5.3% in the current year. The authority sees gross domestic product growth slowing to 7.8% next fiscal, from 9.2% estimated by the government this year.
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