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RBI alert on food prices with recurring food price shocks and renewed flash points on geo-politics

Repeated food price shocks have frustrated the central bank in its efforts to bring down inflation to the mandated target of 4 per cent

Our Special Correspondent Mumbai Published 16.02.24, 10:13 AM
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Reserve Bank of India (RBI) governor Shaktikanta Das on Thursday said recurring food price shocks and renewed flash points on the geo-political front pose a challenge to the ongoing disinflation process and that central banks must remain vigilant to navigate through the last mile of disinflation as it is often the most difficult part of the journey.

Reiterating that stable and low inflation will provide the necessary bedrock for sustainable economic growth, Das said a better understanding of the supply side of the economy has become very important for conducting monetary policy more effectively.

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Repeated food price shocks have frustrated the central bank in its efforts to bring down inflation to the mandated target of 4 per cent.

Recently, Das said the inflation trajectory would be shaped by the outlook on food inflation, about which there is considerable uncertainty.

He pointed out that adverse weather events remain the primary risk even as increasing geopolitical tensions are leading to supply chain disruptions and price volatility in key commodities, particularly crude oil.

The RBI governor said that while they remain vigilant to navigate through the last mile of disinflation, stable and low inflation will provide the necessary bedrock for sustainable economic growth.

He observed that India has successfully navigated through multiple challenges.

According to Das, the macroeconomic models used by central banks so far have mainly focused on the demand side of the economy and adequate emphasis was not given to the supply-side factors.

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