 "Have distance to cover on inflation, can't look other way: RBI Governor")
The Reserve Bank of India (RBI) would not rush to cut interest rates despite inflation easing in the country, said Governor Shaktikanta Das on Friday in Singapore.
“Inflation has moderated from its peak of 7.8 per cent in April 2022 into the tolerance band of +/- 2 per cent around the target of 4 per cent, but we still have a distance to cover and cannot afford to look the other way,” he said at the Bretton Woods Committee’s Future of Finance Forum.
“The Reserve Bank’s projections indicate that inflation is likely to ease further from 5.4 per cent in 2023-24 to 4.5 per cent in 2024-25 and 4.1 per cent in 2025-26.”
India's inflation edged up slightly to 3.65 per cent in August from 3.6 percent in July, as a favorable base from the previous year helped keep consumer inflation in check despite rising food prices. It marked the second consecutive month that retail inflation was below 4 per cent and the twelfth straight month it stayed under the RBI's 6 per cent threshold.
Das said that the stress in the global commercial real estate (CRE) sector requires close monitoring. “Banks exhibit high sensitivity to expected and unexpected CRE losses, due to the relatively high CRE coverage ratios in their loan books.”
“Liquidity squeezes can materialise for banks with large CRE exposures, as short sellers may target them and investor confidence may slip further. As I said earlier, staying alert and undertaking forward looking regulatory measures ahead of the curve can contain the risks to bank balance sheets and systemic stability,” he said.