High inflation rate mainly a consequence of exogenous price shocks: RBI MPC member Shashanka Bhide

Shashanka Bhide further said the inflationary pressures are high and it certainly is a test for India's inflation targeting framework.

The high inflation rate in the last three quarters is mainly a consequence of the 'exogenous' price shocks and addressing the issue will require coordinated policy efforts, Reserve Bank of India (RBI) Monetary Policy Committee (MPC) member Shashanka Bhide has said.

Mr. Bhide further said the inflationary pressures are high and it certainly is a test for India's inflation targeting framework.

"The high inflation rate in Q2 FY2022-23 follows high inflation in the previous two quarters.  "High fuel and food prices and their spillover to other sectors have sustained the high inflation rate," he said in an email interview with PTI.

The retail inflation based on CPI has remained above 6% since January 2022, and it was 7.41% in September. The MPC factors in retail inflation while deciding the RBI's bimonthly monetary policy.

"While this pattern is mainly a consequence of the exogenous price shocks, it is important to take measures to limit the spillover of the price shocks to the rest of the economy.  "Addressing these issues will require coordinated policy effort, monetary policy and other economic policies," Mr. Bhide said.

As per the mandate given to the RBI by the Union government, the Central bank is required to ensure retail inflation remains at 4% with a margin of 2% on either side.

“Noting that the present global macroeconomic environment is challenging in terms of inflationary pressures and growth,” he said, “With its diverse economic base and prudent policies, India should be able to meet these challenges”. Mr. Bhide said the monetary policy tightening by the RBI aims to bring down the inflationary pressures as high inflation adversely affects consumption and investment demand.