RBI To Keep Inflation On A 'Tight Leash', Says Governor Das After August Uptick

The Reserve Bank of India will look to keep inflation on a 'tight leash' after a slight rise in the latest reading as the central bank sees upside risks due to adverse weather and geopolitical events.

Governor Shaktikanta Das said during this policy address on Wednesday that headline inflation moderation is expected to reverse in September but will likely remain elevated in the near term. "Unexpected weather events and geopolitical tensions continue to pose major upside risks to inflation."

Core inflation appears to have bottomed out, and food inflation pressures could see some easing due to Kharif sowing and good soil moisture, Das said.

India's retail inflation remained at near a five-year low even after it rose marginally in August, driven by the rise in vegetable prices. The Consumer Price Index-based inflation rose to 3.65% last month, compared to 3.54% in July.

The RBI governor said the prevailing and expected inflation growth balance has created congenial conditions for a change in stance to 'neutral'.

The CPI inflation is seen at 4.5% in the financial year 2025. The inflation is expectant at 4.1% in the second quarter, 4.8% in the third quarter, and 4.2% in the fourth quarter of the current fiscal year.

It is with a lot of effort that the "inflation horse has been brought to the stable that is closer to the target," Das said. "We have to be very careful about opening the gate as the horse may simply bolt again. We must keep the horse on a tight leash so we don't lose control."

The MPC voted to remain unambiguously focused on durable alignment of inflation to target while supporting growth, Das said.

The central bank kept the benchmark repo rate unchanged for the tenth straight meeting, but changed the stance to neutral, paving the way for future rate cuts.