RBI Projects CPI Inflation at 4.5% for FY25

During the RBI Monetary Policy Committee (MPC) announcement, Governor Shaktikanta Das emphasized the importance of maintaining moderate inflation to ensure economic stability. The projected CPI inflation for the fiscal year 2024-25 (FY25) stands at 4.5%, with fluctuations across quarters.

Inflation Outlook

Current Scenario and Trends

• CPI inflation is expected to drop to 3.8% by Q2FY25 before rising again towards the end of the fiscal year.
• Food inflation remains volatile, hindering the disinflation process, although it decreased slightly to 7.8% in February.

Factors Influencing Inflation

• Record rabi wheat output and signs of a normal monsoon are anticipated to stabilize cereal prices.
• Climatic shocks pose a significant upward risk to food prices, especially with low reservoir levels and forecasts of above-average temperatures.
• Fuel price deflation is likely to deepen in the near term, although upward pressures are observed due to international crude oil price firming and geopolitical tensions.

RBI MPC Outcome

• The MPC voted to maintain the policy repo rate at 6.50%, with a focus on withdrawing accommodation to align inflation progressively with the target while supporting growth.
• Five out of six members voted to retain the policy repo rate, while one member suggested a 25 basis points reduction.

Voting Details

• Dr. Shashanka Bhide, Dr. Ashima Goyal, Dr. Rajiv Ranjan, Dr. Michael Debabrata Patra, and Shri Shaktikanta Das voted in favor of maintaining the policy repo rate and focusing on inflation alignment with the target.
• Professor Jayanth R. Varma voted for a change in stance to neutral, proposing a 25 basis points reduction in the policy repo rate.