There’s no chance the economy will go into a vortex of stagflation, Das told an industry meeting hosted here by the CII tonight.
There is no prospect of the economy entering a vortex of stagflation and retail inflation is expected to moderate in the future, Reserve Bank governor Shaktikanta Das said on Monday, despite fears of imported inflation amid the massive spike in commodity prices, with especially crude oil, after Russia invaded Ukraine last month.
Inflation in the retail sector has already risen to 6.07 percent in February, exceeding the upper limit of the parliamentary mandate. This is the second consecutive month in 2022 in which retail inflation has passed 6 percent, reaching 6.01 percent in January. The previous record was 6.26 percent in June 2021.
There’s no chance the economy will go into a vortex of stagflation, Das told an industry meeting hosted here by the CII tonight. He was also quick to add that he expects retail inflation to moderate in the future.
Stagflation or recession inflation is a situation where prices rise too high but the economy slows down or goes into a recession-like situation and unemployment also rises.
Similarly, the governor also expects the rupee to remain stable.
The rupee underperformed emerging markets worst since Russia’s invasion of Ukraine, plunging as low as 77.27 early this month. Analysts expect it to test $78 to a dollar by June if the war escalates or continues.
According to the latest RBI data, the central bank defended the rupee vigorously earlier this month by selling nearly $10 billion from reserves, making it the highest forex intervention by the monetary authority in a decade.
Under the agreement with the government, the Reserve Bank must ensure that CPI inflation remains at 4 percent with a margin of 2 percent on both sides.
Similarly, wholesale price inflation rose to 13.11 percent in February as the prices of raw and non-food items hardened, though food items softened.
According to CPI data, the price increase in the food basket was 5.89 percent in February, from 5.43 percent in the previous month. In the food basket, grain inflation rose to 3.95 percent; meat and fish to 7.45 percent, while for eggs the price increase during the month was 4.15 percent.
The RBI maintained its FY22 retail inflation projection at 5.3 percent, with the March quarter at 5.7 percent due to an unfavorable base effect. The central bank has forecast retail inflation for FY23 at 4.5 percent.
This post No prospect of economy entering a vortex of stagflation, says RBI governor
was original published at “https://www.financialexpress.com/economy/no-prospect-of-economy-falling-into-stagflation-vortex-says-rbi-governor/2467027/”
