Stubborn Food Prices Hamper Retail Inflation Decline: RBI Report

Stubborn food prices continue to hinder the decline in overall retail inflation, according to RBI Governor Shaktikanta Das. The Monetary Policy Committee retained the benchmark interest rate at 6.50%. Food inflation remains a significant challenge, although a normal monsoon could ease price pressures.

Stubborn food prices are responsible for the slow pace of decline in overall retail inflation, Reserve Bank of India (RBI) Governor Shaktikanta Das said while voting to maintain the status quo on policy rates earlier this month, the MPC minutes released on Friday revealed.

The Monetary Policy Committee (MPC) voted 4:2 in favor of retaining the benchmark interest rate (repo) at 6.50 percent for the eighth consecutive time.

Headline CPI inflation is moderating, but at a sluggish pace, and the final phase of disinflation is proving to be gradual and lengthy, Das stated in the meeting, according to 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 noted.

He also emphasized that a normal monsoon might eventually lead to the easing of price pressures in crucial food items.

Significant favorable base effects could temporarily and singularly cause inflation to dip below the target rate in the June quarter before rising again in the third and fourth quarters of the current fiscal year.

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 percent.

External members on the MPC -- Ashima Goyal and Jayanth R Varma -- voted to reduce the policy repo rate by 25 basis points.