A premature pause in monetary policy action would be a costly policy error at this juncture, the RBI governor stated in the MPC minutes, while voting for an increase of 35 basis points in the repo rate - a departure from 50 bps on three previous occasions - which itself conveys the signal of an improvement in the inflation outlook. Given the uncertain outlook, it may engender a situation where we may find ourselves striving to do a catch-up through stronger policy actions in the subsequent meetings to ward-off accentuated inflationary pressures. Headline inflation is moderating, albeit slowly. While the worst of inflation is behind us, it remains above the upper tolerance level. It is expected to decline in H1:2023-24 but would still be well above the target. Uncertainties surrounding the inflation trajectory remain sizeable, given the geopolitical tensions, global financial market volatility, pending pass-through of input costs to domestic output prices and weather-related disruptions. Core inflation (CPI excluding food and fuel) is exhibiting persistence around 6 per cent for the past few months. Hence, there is no room for complacency and the battle against inflation is not over. This necessitates a constant vigil on prices, the minutes further noted.
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