Inflation May Progressively Ease In The Second Half Of The Fiscal Year

Inflation is a reflection of the public’s faith and confidence in the country’s economic institutions, Das stated at the first Kautilya Economic Conclave.

RBI Governor Shaktikanta Das expressed optimism that the pricing situation would progressively improve in the second half of the current fiscal, saying the central bank will continue to implement monetary measures to stabilize inflation in order to achieve robust and sustained development.

Inflation is a reflection of the public’s faith and confidence in the country’s economic institutions, Das stated at the first Kautilya Economic Conclave.

Overall, as the supply situation looks good with a few indications of a steady recovery in the first quarter (April-June) of 2022-23, our current analysis is that inflation is likely to decline gradually over the second half of 2022-23, without the possibility of a hard arrival. in India. Said the Governor.

Noting that price stability is critical to sustaining macroeconomic and financial stability, he stated that the central bank will take steps to preserve and promote macroeconomic stability.

“While circumstances outside our control may impact inflation in the near run, monetary policy determines its direction over the medium term.” As a result, monetary policy must move quickly to anchor inflation and expectations, putting the economy on a solid and sustainable development path.

“We will continue to adjust our policies with the overall objective of maintaining and promoting macroeconomic stability,” he added.

Das highlighted that the Monetary Policy Committee (MPC) increased its inflation forecast for 2022-23 in two stages to 6.7% in April and June, taking account of developing conditions and inflation pressures becoming more widespread.

He said that the MPC also chose to raise the policy repo rate by 40 basis points and 50 basis points in May and June, respectively, due to geopolitical spillovers on food prices.

This was in addition to the 40-basis point (bps) effective rate increase from the implementation of the Standing Deposit Facility (SDF) at 3.75 percent.

During this time (April to June 2022), the MPC also revised its stance on accommodation withdrawal.

In terms of global growth prospects, Das stated that drastically tightening financial conditions owing to continued monetary policy normalization on the one hand, and persistent geopolitical tensions on the other, represent considerable negative risks in the short term.

They also raise concerns about stagflation worldwide, predicting economic downturns in various parts of the world. he said.

Observing that the benefits of globalization are accompanied by dangers and problems, Das stated that price shocks in food, energy, commodities, and vital inputs are conveyed globally via complicated supply networks.

Indeed, he stated, recent events demand an increased understanding of global forces in local inflation dynamics and macroeconomic developments, emphasizing the importance of improved policy coordination and interaction across nations in order to achieve better results.

Inflation

Inflation is a measure of purchasing power. It is defined as the rate at which prices for goods and services change over a period of time (usually annually).

Simply put, when inflation rises, consumer spending declines because when prices rise, people are less likely to buy more.

For example, when your grandfather told you that an ice cream cone he would buy for $ 3.89 was just $ 0.50 just like you. . . that is inflation. Over time, inflation lowers inflation because the same amount of money buys fewer goods.

Expected vs Unexpected Inflation

The thing about inflation is that it is always there — waiting. We assume that the cost of the daily goods and services we need will gradually increase over time, and as a result, economists put it into their speculation. Unexpected inflation, however, is a different matter. This situation occurs when inflation is recorded at higher levels than economists expect and leads to economic instability. Governments and policymakers try to curb unexpected inflation and control its negative effects, which we will discuss below.

How Is Inflation Measured?

As stated by the percentage, inflation takes into account many factors, ranging from broad estimates such as the total cost of living in the country to specific needs, such as groceries, fuel, and heating costs — even the cost of cutting hair.

These products and services track certain sectors of the economy. Economists divide these categories into a measurement tool known as a market basket. Then they compare the prices of goods and services at different times, and because of their efforts, they are able to make a price index.