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Keeping close watch on supply shock, impact on inflation: RBI Guv Malhotra
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....eeping close watch on supply shock, impact on inflation: RBI Guv Malhotra<BR>FEMA / RBI<BR>Dated:- 18-5-2026<BR>PTI<BR>Mumbai, May 18 (PTI) The Reserve Bank is keeping a close vigil on whether and when supply shocks get embedded in the general price level, warranting monetary policy action, Governor Sanjay Malhotra has said amid persisting global uncertainties. Malhotra said the RBI has been ma....
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....intaining a neutral stance since June 2025, which gives it the flexibility to remain nimble in approach and respond judiciously to incoming data and information. During a panel discussion titled 'Monetary Policy in a Time of Heightened Uncertainty' jointly organised by the Swiss National Bank (SNB) and the International Monetary Fund (IMF) in Switzerland last week, the governor said India is us....
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....ed to frequent supply shocks. "In a supply shock, we generally try to 'look through' the first-round impact, if we believe that it is transitory and will dissipate quickly. "However, if sustained increase in prices drives up wages, production and transportation costs (second-round effects) and leads to generalisation of inflation pressures, the 'look through' approach is no longer optimal, r....
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....equiring tighter policy," Malhotra said. The wide tolerance band of 200 basis points around the inflation target of 4 per cent provides the necessary policy space to the RBI to accommodate supply shock-induced volatility in the short run, he said. At the same time, there is a focus on the medium-term objective of price stability, he added. "...we are aware that the global situation is st....
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....ill fluid, and its macroeconomic implications are still unfolding. "We are keeping a close vigil on whether and when the supply shock can become embedded in the general price level that may warrant monetary policy action," Malhotra said. The governor further said it is important that policy frameworks focused on price stability are flexible enough to allow central banks to look through trans....
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....itory shocks while remaining agile and nimble, maintaining a broad policy stance, and avoiding making firm commitments on the future path of policy. In such circumstances, he said, a broad approach is to be even more data dependent and to continuously reassess the balance of risks. Whether to look through or not depends on the duration of inflation and whether it is generalised in the economy. ....
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