Recent softening of commodity prices and supply chain bottlenecks should help in lowering inflation going ahead says RBI governor

Shaktikanta Das, Governor of the Reserve Bank of India stated in a latest update that multiple external shocks in the form of COVID related global supply chain disruptions, food and energy crisis following the war in Ukraine, and financial market volatility arising from the aggressive monetary policy tightening have exerted sustained price pressures in the South Asian economies, as in other parts of the world. During the first three quarters of 2022, food price inflation in South Asia averaged more than 20 per cent. The region's heavy dependence on imported fossil fuels has made it vulnerable to imported fuel inflation. For successful disinflation, credible monetary policy actions accompanied by targeted supply side interventions, fiscal, trade policy and administrative measures have become the key instruments. While the recent softening of commodity prices and supply chain bottlenecks should help in lowering inflation going ahead, risks to growth and investment outlook may rise if inflation persists at high level. Prioritising price stability, may therefore be the optimal policy choice in the current context for the region. The approach to disinflation, however, needs to be mindful of the rising risks to the growth outlook in an environment of deteriorating prospects for global growth and trade activity.

Powered by Capital Market - Live News