Inflation trajectory heavily contingent on geopolitical developments: RBI Dy Guv

New Delhi: Inflation trajectory continues to be "heavily contingent" upon the evolving geopolitical developments, international commodity prices and global financial sector developments, Reserve Bank Deputy Governor Michael Debabrata Patra has said.

The RBI on its part has front-loaded monetary policy response, with a cumulative 140 basis points increase in the benchmark rate so far with an aim to check high inflation which is ruling above its comfort zone of 6 per cent for the past seven months.

In its meeting early this month, the monetary policy committee (MPC) of the RBI decided to remain focused on the withdrawal of accommodation to ensure that inflation remains within the target going forward while supporting growth.

Also, the RBI is engaged in withdrawal of the liquidity infused into the economy during the pandemic in a calibrated, multi-year time frame.

"In the near-term, however, the inflation trajectory continues to be heavily contingent upon the evolving geopolitical developments, international commodity market dynamics and global financial market developments," Patra said on Wednesday in his keynote address at the SAARC FINANCE Seminar hosted by India here.

The Reserve Bank uploaded his speech on its website on Friday. India has adopted an inflation targeting framework since 2016, with a target of 4 per cent defined in terms of headline CPI inflation within a tolerance band of +/- 2 per cent around it.

While inflation averaged under 4 per cent during 2016-20, it rose to 6.2 per cent in 2020-21 when the first wave of COVID-19 hit the

country.

It moderated in the following year (2021-22) to 5.5 per cent and was projected to ease further to 4.5 per cent in 2022-23 as recently as February 2022.

Patra said the war in Ukraine has altered the outlook drastically.