Resurgence in inflation reignited debate on monetary policy response: RBI Guv
New Delhi
20-August-2021
RBI Governor Shaktikanta Das has said that the resurgence of inflation in May and June reignited the debate on monetary policy response.
"The resurgence in inflation in May and June above the upper threshold has reignited the debate on the appropriate monetary policy response. The gains in monetary policy credibility since the adoption of inflation targeting have helped the MPC to respond effectively to growth-inflation trade-offs posed by an exceptional shock like the Covid-19 pandemic," he said.
He noted that the flexible inflation targeting (FIT) framework allows adequate flexibility to the MPC to deal with unanticipated shocks to the economy in the conduct of its monetary policy.
As per the RBI's assessment of the resurgence in inflation in India since the June 2021 policy is that it is driven largely by adverse supply-side drivers impinging on food, fuel and core groups due to multifarious disruptions caused by the pandemic.
"Many of current price shocks are likely to be one-off or transitory. Weak demand conditions and low pricing power are limiting the extent of their pass-through to output prices," Das said.
Managing the economy and the financial markets since the beginning of the pandemic has thrown up several challenges with crosscurrents and conflicting objectives, he said.
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Voting in favour of a status quo of policy rate and accommodative stance, Das said: "Macroeconomic policies have to be carefully nuanced by making judicious policy choices. Continued policy support with a focus on revival and sustenance of growth is indeed the most desirable and judicious policy option at this moment."-IANS
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