Festival demand set to boost economy: RBI


NEW DELHI: The Indian economy is poised to shrug off the modest tapering of growth momentum in the first quarter of 2022-23 and aggregate demand is firm and set to expand further as the festival season sets in, RBI said in its September bulletin.
It also said inflation remains elevated and above the tolerance level, underscoring the need for monetary policy to keep second order effects contained and inflation expectations firmly anchored. This indicates that the central bank may raise interest rates in the monetary policy review at the end of the month.
RBI said inflation momentum should ease in the third quarter and turn mildly negative in fourth quarter. “With base effects being favourable in the second half of 202223, inflation should moderate, although upside risks are in the air. On the downside, imported inflation pressures are letting up, helped by the stability in the exchange rate, and input costs have eased, which could temper the pass through to selling prices. ”
It said at this critical juncture, monetary policy has to perform the role of nominal anchor for the economy as it charts a new growth trajectory. “The focus should be on being time consistent in aligning inflation with the target. In this context, front-loading of monetary policy actions can keep inflation expectations firmly anchored and reduce the medium-term growth sacrifice. ”





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