RBI forecasts retail inflation at 5.4% for 2023-24: Governor Das

The Reserve Bank of India on Friday its retail inflation forecast unchanged and sees it averaging 5.4 per cent in the financial year 2023-24. The central bank decided to keep the policy rate unchanged for the fourth time in a row as it maintains a tight vigil on inflation.

Announcing the bi-monthly monetary policy on Friday, RBI governor Shaktikanta Das said the Monetary Policy Committee (MPC) unanimously decided to keep the repo rate unchanged at 6.5 per cent. It has raised rates by 250 basis points (bps) since May 2022 in a bid to cool surging prices.

He said the MPC will remain watchful of the inflation and remains resolute in its commitment to align inflation to the targeted level. According to him, the growth projection has been retained at 6.5 per cent for the current financial year with risks evenly balanced.

The MPC meeting took place against the backdrop of Consumer Price-based Inflation (CPI) touching 6.83 per cent in August. The September print of inflation is expected next week.

The government has mandated the RBI to keep CPI inflation at 4 per cent with a margin of 2 per cent on either side.

Annual retail inflation eased to 6.83% in August, from a 15-month high of 7.44% in July, but remained well above the central bank's 2%-6% comfort band. However, core inflation, excluding food and oil, dropped below 5%.

Sharp spikes in food prices have been the main driver of headline inflation as erratic weather hurts production of staples like vegetables, milk and cereals.

"While declining core inflation is a silver lining, the overall inflation outlook remains clouded," said Das, citing the impact of patchy rains and volatile global food and energy prices.

The central bank sees inflation falling to its 4% target only by the second quarter of next financial year, it said in a separate report published alongside the monetary policy review.

(With inputs from PTI, Reuters)