Inflation expected to come down over the year: Reserve Bank of India`s MPC member
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The Reserve Bank of India's (RBI's) -- Monetary Policy Committee (MPC) member Ashima Goyal has said inflation is expected to come down over the year. She asserted ‘Government supply-side action coordinated with a flexible inflation targeting regime has kept Indian inflation rates lower than other countries and our own past averages even in this period of major adverse external supply shocks’.
She said that India has successfully dealt with 'pluri-shocks' over the past three years, showing considerable resilience. She noted ‘Since nominal policy rates rise with inflation to maintain an expected real positive rate under inflation targeting this prevents demand over-heating and anchors inflation expectations.’
She said policy rates had been cut steeply during the pandemic, so they had to be raised fast after recovery was established. But, she emphasised policy rates must not rise too much at present because of slowing external demand. Domestic demand must be allowed to compensate. According to Goyal, as long as the expected future real policy rate does not rise much above unity, RBI is not over-tightening.
