RBI raises retail inflation forecast for FY22 to 5.7 percent
The Reserve Bank of India on Friday raised its retail inflation forecast for the current fiscal to 5.7 per cent due to supply side constraints, firming crude oil prices and higher raw material cost. In the last Monetary Policy Committee (MPC) meeting in June, the RBI’s CPI inflation estimate for the current fiscal was 5.1 per cent.
The Reserve Bank of India (RBI) on Friday decided to keep the repo rate – at which it lends short-term money to banks – unchanged at 4 per cent but maintained a lenient stance as the economy is yet to recover from the impact. of the second COVID wave.
Announcing the MPC’s decision, RBI Governor Shaktikanta Das said a “preemptive monetary policy response” at this stage could kill the nascent and hesitant recovery (of the economy) which is trying to gain a foothold in extremely difficult conditions.
“Inflation is likely to remain close to the upper tolerance band for Q2 of 2020-21. But this pressure should ease in Q3 of 2021-22 due to kharif crop arrivals and supply side measures,” Das said.
“Considering all these factors, CPI (Consumer Price Index) inflation is now projected to remain at 5.7 per cent during 2021-22,” he said.
This includes 5.9 percent in Q1; 5.3 percent in Q3; Das said the risk is broadly balanced with 5.8 per cent for the fourth quarter (of FY 2021-22) and 5.1 per cent for the first quarter of 2022-23.
The RBI has a mandate to keep inflation in a band of 2-4 per cent, with a tolerance level of 2 per cent on either side.
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