RBI maintains 4.5% inflation forecast for FY25
What's the story
The Reserve Bank of India (RBI) has kept its inflation forecast for the fiscal year 2024-2025 at 4.5%, as announced by the Monetary Policy Committee (MPC). The quarterly breakdown is as follows: Q1 at 4.9%, Q2 at 3.8%, Q3 at 4.6%, and Q4 at 4.5%. Shaktikanta Das, the Governor of the RBI, stated that the risks are evenly balanced.
Inflation concerns
Persistent food inflation pressures outweigh benefits
Das explained that the Consumer Price Index (CPI) headline inflation had softened in March and April. However, he pointed out that the persistent food inflation pressures have outweighed the benefits from core disinflation and fuel deflation. Despite some reduction, inflation in pulses and vegetables remained in double digits. He also observed that vegetable prices are rising this summer after a brief correction during the winter season.
Concerns ahead
Final stage of disinflation may be prolonged and challenging: Das
Das has expressed concerns that the final stage of disinflation in the country may be prolonged and challenging due to ongoing geopolitical tensions, supply chain disruptions, and commodity price volatility. Despite growth remaining robust, the central bank has more flexibility to prioritize price stability to ensure that inflation aligns with the target over the long term, given the current economic environment. RBI has maintained the repo rate at 6.5% for the eighth consecutive time.