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RBI expects inflation to come down to below 6% by March 2023, to keep “Arjuna’s eye” on prices: Governor

Shaktikanta Das said the medium-term inflation outlook is exposed to heightened uncertainties. (File)

New Delhi:

The worst is behind us, but there is no room for complacency in the fight against price rise, the Reserve Bank today projected inflation to come down below the upper limit of 6 per cent by the March quarter of the current fiscal. Is.

However, it retained its 6.7 per cent average retail inflation forecast for the current fiscal. Retail or Consumer Price Index (CPI) based inflation has been above the RBI’s upper tolerance limit of 6 per cent for the 10 months till October.

RBI Governor Shaktikanta Das said in his monetary policy statement that the central bank would keep an ‘arjuna ki nazar’ (close attention) on rising inflation dynamics and projected inflation to remain above 4 per cent for the next 12 months.

“Over the next 12 months, inflation is expected to remain above the target of 4 per cent… Keeping an eye on the impact of our earlier monetary policy actions, we will keep a watchful eye on rising inflation dynamics and stand ready to act As may be required,” Shaktikanta Das said.

The interest rate-setting panel of the RBI on Wednesday raised the benchmark rate by 35 basis points to 6.25 per cent, taking the cumulative rate hike from May 2022 to 2.25 per cent.

The RBI said its actions would be ‘nimble’ keeping in view the growth factor. It has also slashed the GDP growth forecast for the current fiscal to 6.8 per cent from 7 per cent estimated in September.

The Reserve Bank has a mandate to keep inflation below 4 per cent with a band of (+/-) 2 per cent.

Shaktikanta Das said the medium-term inflation outlook is exposed to heightened uncertainties from geopolitical tensions, financial market volatility and increased incidence of weather-related disruptions.

In recent days, global commodity prices, including crude oil, have declined somewhat, but a revival in domestic services sector activity could also push prices higher, especially as firms push up input costs.

“Taking into account these factors and assuming an average crude price (Indian basket) of USD 100 per barrel, headline inflation in 2022-23 is projected at 6.7 per cent, Q3 (October-December) 6.6 per cent and Q4 (January-December) 6.6 per cent. March) at 5.9 per cent,” the RBI said.

Retail inflation for the first and second quarters of the next fiscal is estimated at 5 per cent and 5.4 per cent, respectively, on the assumption of a normal monsoon.

Pressure points remain from high and sticky core inflation and exposure of food inflation to international factors and weather-related events.

Going forward, food inflation is likely to ease with a mild winter and the prospect of a bumper rabi crop, but pressure points remain in the form of prices of cereals, milk and spices in the near term. Risk from adverse weather events adds uncertainty to the prospect.

Shaktikanta Das said inflation is coming down around the world on softening commodity and oil prices, but stressed that we cannot be “complacent” despite the positive news on inflation. Worst of inflation is behind us, he said after monetary policy press conference

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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