Need to keep inflationary expectations firmly anchored: RBI article

According to an article published in the Reserve Bank's latest bulletin issued on Friday, inflation has remained intense, emphasising the need for fiscal policy to keep inflationary expectations firmly rooted.

Retail inflation accelerated after a three-month decline and reached 7% in August, owing primarily to higher food prices.

The consumer price index (CPI)-based inflation, which the RBI uses to determine monetary policy, has remained above its upper limit of 6% for the eighth month in a row.


According to the article by a team led by RBI Deputy Governor Michael Debabrata Patra, a loss of acceleration in the global economy may be trying to take the edge off rising prices, which remain high.

Indian economy is positioned to shake off a modest slowing of growth momentum in the first quarter of 2022-23. The consumer spending is strong and expected to grow further as the festival season approaches.

"Inflation remains elevated and above the tolerance level, underscoring the need for monetary policy to keep second order effects contained and inflation expectations firmly anchored," the authors said.

Central bank, on the other hand, stated that the opinions expressed in the piece are those of the writers and do not reflect the views of RBI.

The central bank already has brought up the crucial short-term lending rate by 140 basis points in three instalments since May this year, according to the recommendations of the RBI Governor-led Monetary Policy Committee (MPC). The MPC's next meeting is set for September 28-30, 2022.