RBI unlikely to change interest rate soon

NEW DELHI: Reserve Bank of India Governor Shaktikanta Das on Thursday said the question of change of stance on interest rate is quite premature given the gap between current inflation and 4% target.

Das said, in an interview to CNBC-TV18, inflation journey is progressing as per expectations, but added that it is the last mile of the journey towards 4%, which will be the most difficult or sticky. “when we move towards 4 per cent CPI (retail inflation) on a sustained basis is when we will get the confidence to think about a change in stance,” he said.

Consumer Price Index (CPI)-based retail inflation has been projected at 4.5% with quarter-wise projections at 4.9% in Q1 (April-June), 3.8% in Q2, 4.6% in Q3, and 4.5% in Q4, RBI had said in its June bi-monthly report. The RBI, which has been mandated to ensure inflation remains at 4% (with margin of 2% on either side), mainly factors in CPI while arriving at its monetary policy.

He had said headline inflation softened during March-April, though persisting food inflation pressures offset the gains of disinflation in core and deflation in the fuel groups. Despite some moderation, pulses and vegetables inflation remained in double digits.

Vegetable prices are seeing a summer uptick after a shallow winter season correction. The deflationary trend in fuel was driven primarily by LPG price cuts in early March. Core inflation softened for the 11th consecutive month since June 2023. Services inflation moderated to a historic low and goods inflation remained contained.

He said many drivers of growth are playing out their role and momentum of growth was strong in fourth quarter of last financial year, which continues to be strong in the first quarter.