Inflation to ease to 4% in two years after peaking, says RBI Governor

Reserve Bank of India Governor Shaktikanta Das seeks to slow India’s inflation to 4 per cent within two years after hitting its peak in the last few months. 

“Inflation has peaked and price gains are getting anchored,” Das said in an interview with television channel ET Now on Tuesday, adding that the central bank is watching every incoming data and there’s “no room for complacency.”

The RBI has raised policy repurchase rate by a total of 140 basis points since May, including back-to-back half point increases in June and August, to cool down inflation within its mandate of 2 per cent-6 per cent. Consumer prices have fallen for three straight months in July but continue to remain above 6 per cent mark.

“We will approach the 4 per cent inflation target in a steady manner, without much of a growth sacrifice,” Das said. He also indicated that stable bond yields reflect that the central bank actions may have worked to tame prices. 

Indian bonds pared losses on Das’s outlook on inflation. The 10-year bond yield was trading 1 basis point higher at 7.28 per cent, compared with an intraday high of 7.31 per cent. Bond yields have also steadily eased after surging post the August policy on the back of a fall in crude prices and return of foreign fund inflows.

“Bond markets are functioning in an orderly manner. We will come in only when we sense disruption in the market,” Das said.