RBI Governor Striving for 4% Inflation Target, flags El Nino as major Challenge

New Delhi (India), 26th June 2023: RBI Governor Shaktikanta Das stated that the Reserve Bank will seek to achieve its 4 percent objective for headline inflation, but that El Nino will be a problem.

Das expressed confidence that the economy will grow at 6.5 percent in FY24, as previously estimated by the RBI, in an exclusive interview with PTI Bhasha at his office.

The central bank’s rate hikes of 2.50 percent since May last year, combined with government supply-side initiatives, have helped bring inflation down to 4.25 percent in May, from a high of 7.8 percent in April last year, according to Das.

He said, “We continue to be watchful on the inflation front. We expect inflation to be at 5.1 percent in FY24, and we will continue to strive and get it down to 4 percent.”

Regarding the high borrowing costs, Das stated that interest rates are directly related to inflation and that the RBI can decrease interest rates if consumer price inflation falls to 4 percent or below on a sustained basis.

The governor noted that the Russia-Ukraine war, which caused a jump in commodity prices, caused a surge in inflation, but that crude prices are no longer a worry from an inflation standpoint now that they’ve dropped to $76-76 per barrel.