“When inflation is still above 5.5%, rather close to 6%, our monetary policy has to remain actively disinflationary and it would be too premature to talk in terms of a pivot in our monetary policy,” Das said in an interview with Reuters.
He however acknowledged the recent fall in core inflation, which strips out volatile food and fuel prices, and said it gives them the satisfaction that monetary policy is working but the target for the monetary policy committee remains the headline number.
The apex bank chief said the global geo-political situation remains volatile and could impact economies around the world with food inflation particularly vulnerable to spikes on the back of disruption in global supply chains and other risks.
Das said he expects January inflation to moderate and the trend has been moderating but unless inflation reaches 4% on a durable basis, the bank cannot get lulled into a complacency or think of changing its policy focus.
Annual retail inflation rose 5.69% in December, the fastest pace in four months but core inflation dropped to a four-year low of 3.8% from around 4.1% in November.
Das, whose term is ends in December, would be the longest serving RBI governor since the 1991 liberalisation.
He has led the world’s fifth largest economy since 2018, keeping inflation and the currency relatively stable through successive shocks including the failure of a large non-bank lender, Covid-19 and the Ukraine war.
He reiterated that the RBI intervenes in the exchange rate market only to prevent undue volatility does not have any specific level of the exchange rate in mind.
The RBI had also pushed back against the International Monetary Fund‘s reclassification in December of India’s exchange rate regime to a “stabilised arrangement” from “floating”, and called the tag “incorrect” and “unjustified”.
“Outcome of the financial stability, macroeconomic stability and return of capital flows has been that the rupee has been very stable. It is not because of RBI’s intervention of trying to keep the rupee at a particular level,” Das said on Wednesday.
He said the central bank would look to opportunistically buy dollars when there are large inflows to ensure there is no sudden large appreciation in the currency.
The central bank would like to continue to build foreign exchange reserves, which currently stand at near 22-month highs of $617 billion, as it wants to avoid the large depreciation pressure seen on the rupee due to sudden capital outflows witnessed during the 2013 taper tantrum, Das said.