October retail inflation to be below 7%, says RBI governor


MUMBAI: RBI governor Shaktikanta Das on Saturday said the consumer price inflation numbers for October, which are to be released next week, will be below 7%. He also said while there was a global debate on whether interest rates would end up being high for too long, it was too early to discuss whether the approach to inflation needs to change.
Das, who took office after his predecessor Urjit Patel’s exit following a debate on the central bank’s autonomy, said during Covid, even purists had realised the importance of coordination between monetary and fiscal authorities.
Speaking at a leadership summit organised by a media organisation, Das said India was taking the G20 leadership at a time when it was among the fastest-growing economies with strong fundamentals. This was when countries were reeling under the triple shock of Covid, the Ukraine war and financial market turmoil following the synchronised mon-etary policy tightening in developed markets led by the US.
“The upper ceiling for our inflation tolerance is 6%. Inflation, which was 7. 4% in September, is expected to be lower than 7% in October,” said Das. He added that any inflation above 6% is detrimental to growth, and the goalpost should not be changed because the target could not be met. “We stay committed to bringing down inflation.
Internationally there is a debate now starting whether the interest rates being ‘low for long’ is moving to an era of ‘high fortoo long’. While every country will have to analyse what they want to do internally, we stand committed to the current target of 4%, which gives us enough flexibility to deal with crises and shocks,” he said.
He said this wasn’t the time to debate whether inflation should be dealt with differently. “If the conflict continues to simmer without being a major war, supply chains will get restored and we will see an earlier end to global inflation than the ‘high for long’ that I spoke about,” said Das. He said debating on whether the inflation target will hurt the credibility of the central bank.
On the exchange rate, Das said the central bank had added $240 billion to its reserves during the pandemic with the idea that there would be a reversal someday. “We built up the reserves only for this rainy day. Even at this point, our reserves are very comfortable,” he said. Das added the central bank has to intervene to anchor expectations and ensure exchange rate stability which is at the heart offinancial sector stability.
Das explained the need for acentral bank digital currency and said it will be a key instrument for cross-border transactions. “On an average, the charges are around 6% for cross-border transfers, according to World Bank. When the CBDC comes in, the costs will be marginal, and it will be instantaneous,” said Das.
Das said there was a need for the government and RBI to talk and engage as both are working in the economy’s interest and the business of public good. “There is also interdependence between the two. The government depends on us for financial inclusion and digital payments, and we need the government for legislative changes.
The government has given us the power to regulate non-banking finance companies, urban cooperative banks and housing finance companies,” said Das. He said while RBI fought inflation with liquidity measures and interest rates, government supported by bringing down taxes on fuel and import duties on pulses.





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