Shaktikanta Das also mentioned that the retail inflation for the Q1 of the next fiscal year (FY 2024-25) is estimated at 5.2%.
The Reserve Bank of India (RBI) has revised its retail inflation projection for the fiscal year 2023-24, increasing it to 5.4 per cent from the earlier estimate of 5.1 per cent. After a meeting with the Monetary Policy Committee (MPC), RBI Governor Shaktikanta Das addressed the press conference. He emphasised that assuming a normal monsoon, the revised projection for retail inflation stands at 5.4 per cent. The second quarter (Q2) is estimated to experience 6.2 per cent inflation, followed by Q3 and Q4 at 5.7 per cent and 5.2 per cent, respectively. Additionally, the forecast for Q1 of the next fiscal year (FY 2024-25) is 5.2 per cent.
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Governor Shaktikanta Das, who had previously expressed the intention to monitor price pressures vigilantly to bring inflation within the tolerance ceiling of 6 per cent, and then subsequently targeted at 4 percent, highlighted that policymakers might need to go beyond mere vigilance. He noted that if necessary, policy instruments will be employed to manage inflation effectively. Das emphasized that it’s not sufficient to merely bring headline inflation within the tolerance band; the focus should be on aligning inflation with the 4 per cent target.
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Governor Das also acknowledged the challenges posed by extreme weather conditions and inflation on the global economy. Despite these challenges, the RBI aims to stay committed to its inflation target, ensuring stability in economic conditions.
Explaining the recent inflation trends, Das stated that July witnessed an accentuation in food inflation, primarily due to adverse weather conditions affecting vegetable prices. He specifically cited a spike in tomato prices and the continued increase in prices of cereals and pulses as contributing factors.
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As widely anticipated by analysts and financial services firms, the RBI decided to maintain its policy rates, keeping the repo rate steady at 6.5per cent. The repo rate is the interest rate at which the central bank lends to other banks. This decision is in line with the central bank’s efforts to balance inflation concerns with economic growth.
The RBI’s adjustment of the retail inflation projection for FY 2023-24 to 5.4 per cent reflects the central bank’s commitment to ensuring price stability and aligning inflation with the 4 per cent target. The decision to keep policy rates unchanged underlines the RBI’s cautious approach to managing inflation while supporting economic growth. As the global economy navigates challenges posed by inflation and extreme weather conditions, the RBI’s proactive stance remains crucial for maintaining a stable economic environment.
