Mumbai: Stubborn food prices are responsible for slow pace of decline in overall retail inflation, Reserve Bank of India (RBI) Governor Shaktikanta Das said while voting for status in policy rates earlier this month, showed MPC minutes released on Friday.
The Monetary Policy Committee (MPC) voted 4:2 in favour of retaining the benchmark interest rate (repo) at 6.50 per cent for the eighth time in a row.
Headline CPI inflation is moderating, but at a very slow pace and the last mile of disinflation is turning out to be gradual and protracted, Das said in the meeting, as per the minutes.
“Food inflation is the main factor behind the grudgingly slow pace of disinflation. Recurring and overlapping supply-side shocks continue to play an outsized role in food inflation,” the governor said.
He also emphasised that normal monsoon may eventually lead to easing of price pressures in key food items.
Large favourable base effects could lead to a temporary and one-off undershoot of inflation to below the target rate in the June quarter, before rising again in third and fourth quarter of the current fiscal.
MPC members Shashanka Bhide, Rajiv Ranjan (RBI executive director), Michael Debabrata Patra (RBI deputy governor) and Das voted to keep the policy repo rate unchanged at 6.50 per cent.
External members on the MPC — Ashima Goyal and Jayanth R Varma — had voted to reduce the policy repo rate by 25 basis points.
