“In this period of prolonged uncertainty, it would be wise to remain agile and respond in a gradual, calibrated and well telegraphed manner to the emerging challenges,” Das said.
Consumer price-based inflation rose to a seven-month high of 6.01 per cent in January.
RBI deputy governor Michael Debabrata Patra observed that monetary policy chasing inflation instead of anticipating it is the main factor weighing down on global growth prospects.
“Monetary policy cannot play its stabilisation role when inflation is the result of supply constraints. So central banks have a choice: either accept higher inflation for some time or be prepared to be accountable for destroying demand,” Patra wrote.
RBI executive director Mridul Saggar felt it is important to maintain credibility by aiming to maintain inflation on a sustained basis at or near the target as soon as real economy conditions normalise.
“Low for long interest rates will certainly bring in macroeconomic imbalances and it is expedient that policy rate should be raised as soon as growth is judged to recover on a durable basis or inflation is seen to be turning endemic,” Saggar wrote. In the interim, the good part is that the country has built buffers against possible capital outflows, he added.
ALCHEMPro News Desk (DS)
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