Disinflation process to be slow and protracted: RBI Governor

Amid easing inflationary pressure in the recent months Reserve Bank of India Governor Shaktikanta Das on Tuesday said the disinflation process in India will be slow and protracted with the 4% inflation target likely to be met only over the medium-term.

"The cumulative impact of our monetary policy actions over the last one year is still unfolding and yet to materialise fully," Das said in a speech at the Summer Meetings organised by Central Banking in London.

Consumer Price Index-based retail inflation declined to 4.25% in May, as per the government data released on Monday. Despite the recent decline, the headline inflation remained above the RBI's medium-term target of 4% for the 44 months in a row.

Das expressed hope that the 4% inflation target would be achieved in the medium-term. "While our inflation projection for the current financial year 2023-24 is lower at 5.1%, it would still be well above the target," he said.

Earlier this month the RBI's Monetary Policy Committee decided to keep the repo rate unchanged at 6.5%. The RBI has kept the policy rates unchanged in the past two reviews after hiking it aggressively.

Referring to the MPC decision on policy rates, Das said, "we decided on a pause in the April and June 2023 meetings, but clarified unequivocally that this is not a pivot – not a definitive change in policy direction."

"Recognising that explicit guidance in a rate tightening cycle is inherently fraught with risks, the MPC has also eschewed from providing any future guidance on the timing and level of the terminal rate," he added.