By Swati Bhat
MUMBAI (Reuters) -The Reserve Bank of India has “won the battle against inflation” but the war is ongoing as price stability remains the central goal, Governor Sanjay Malhotra said during a fireside chat at a Financial Express event on Friday.
The RBI delivered a larger-than-expected 50 basis point rate cut at its June policy review but shifted its stance to “neutral,” suggesting limited room for further easing.
However, with retail inflation falling to a six-year low and likely to hit a record low in July, calls have grown for at least one more rate cut this year. Many analysts argue the sharp disinflation also points to weakening demand in the economy.
Malhotra said monetary policy being forward looking, will place greater focus on the outlook for growth and inflation, rather than current levels when the policy panel meets on Aug. 6.
The change in stance to “neutral” did not mean a reversal from the easing of policy, he said.
“We have the flexibility to move up, down or pause. Yes, it does mean, the bar for further easing is higher than it would have been if it (stance) was accommodative,” he added.
Monetary policy transmission has quickened due to front-loaded rate cuts and will help in supporting economic growth as overall flow of funds to the industry and economy is improving, Malhotra said.
Further monetary policy measures would depend on the requirement but the central bank has enough ammunition in its armory to use as and when required, he added.
(Reporting by Swati Bhat; editing by Sudipto Ganguly and Nivedita Bhattacharjee)
