RBI May Intervene If Iran War Leads To Persistent Inflationary Pressure: Governor

New Delhi, May 13 (KNN) India’s monetary policy can accommodate temporary supply-side shocks but may require intervention if inflationary pressures persist following the Iran war-driven surge in global oil prices, Reserve Bank of India (RBI) Governor Sanjay Malhotra said.

Speaking at a conference in Switzerland on Tuesday, Malhotra indicated that while initial price shocks may be transitory, policymakers remain alert to the risk of sustained inflation, according to Reuters.

Fuel Prices May Be Adjusted

He noted that if the Middle East conflict continues, the government may need to raise domestic fuel prices. Given India’s adherence to fiscally prudent policies, higher global oil prices are likely to be gradually passed on to consumers.

Policy Coordination Key

Malhotra emphasised the need for close coordination between fiscal and monetary authorities during periods of elevated uncertainty, particularly as external shocks begin to impact domestic inflation and growth.

Flexible and Data-Driven Approach

Referring to the RBI’s April monetary policy review, he said the central bank had adopted a wait and watch stance at a time when it was still early to assess the full impact of rising oil prices.

He added that monetary policy would remain nimble and flexible, with decisions increasingly guided by incoming data and taken on a meeting-by-meeting basis.

Gradualism in Uncertain Times

Highlighting the broader approach of central banks, Malhotra said policymakers must act cautiously and follow a path of gradualism in the face of heightened global uncertainty.

The remarks underscore the RBI’s balanced stance as it navigates evolving inflation risks while supporting economic stability.

(KNN Bureau)