RBI lowers FY24 inflation

New Delhi: The Reserve Bank of India (RBI) on Thursday marginally cut retail inflation projection to 5.2 per cent in the current fiscal, but flagged adverse climatic conditions and rising uncertainty in international financial markets as future risks. Retail inflation remained above the RBI’s upper tolerance level of six per cent for two months and in February it was 6.44 per cent. According to Das, for FY24 the inflation rate is predicted at 5.2 per cent with 5.1 per cent in Q1, 5.4 per cent in Q2, 5.4 per cent in Q3 and 5.2 per cent in Q4.

Although the expectation of a record Rabi harvest bodes well for easing of food price pressures, milk prices are likely to remain firm going into the summer season due to tight demand-supply balance and fodder cost pressures, RBI said.

RBI on Thursday decided to keep the key benchmark policy rate at 6.5 per cent even as inflation is trending above its tolerance level. The rate hike has been paused after six consecutive rate increases aggregating to 250 basis points since May 2022. Although the Reserve Bank pared its inflation estimate from its February projection of 5.3 per cent, RBI Governor Shaktikanta Das said the overall outlook remains ‘dynamic and fast evolving’ amid the recent jump in crude oil prices following sudden announcement by OPEC+ countries to cut output. Assuming annual average crude oil price of $85 per barrel and a normal monsoon, the retail inflation in the current fiscal is projected to moderate to 5.2 per cent, Das said in the monetary policy statement.