At the meeting of the RBI Monetary Policy Committee, the Reserve Bank of India (RBI) upheld its forecast of 5.4% inflation in 2023–2024. Shaktikanta Das, the governor of the Reserve Bank of India, announced that the current quarter’s forecast of 5% CPI inflation is being revised to 5.4% for the fourth quarter. Now, CPI inflation is expected to be 4.5% for the forthcoming fiscal year 2024–2025, with Q1 at 5%, Q2 at 4%, Q3 at 4.6%, and Q4 at 4.7%, assuming a regular monsoon for the future year.
Governor Das emphasized that from 6.7% for the entirety of 2022 to an average of 5.5% from April to December 2023, headline inflation decreased. Das said that the rising cost of food was still causing some volatility in the inflation trend.On the other hand, the CPI’s deflation fueled demand and purchased inflation, which eventually decreased to 3.8%, a four-year low.Core inflation broadly declined in December, but total inflation either declined or stayed unchanged.
“The prognosis for food inflation, which is rife with uncertainty, would affect the course of inflation going ahead. The greatest risk that affects the Rabi crop is still adverse weather occurrences. Increased geopolitical tensions are also causing major commodities’ prices, particularly crude oil, to fluctuate and to disrupt supply chains.
Positively, the progress made in seeding Rabi has been adequate. Furthermore, it bodes well for the season. Prices have been problematic, with tomatoes and onions in particular showing seasonal price corrections. These considerations have led to a projection of 5.4% CPI inflation, or headline inflation based on consumer prices, for the current year, 2023–2024, according to Das.
According to Das, the Monetary Policy Committee (MPC) determined to keep the policy rate at 6.5% after carefully assessing the financial and macroeconomic events. According to a statement, Drs. Shashanka Bhide, Ashima Goyal, Rajiv Ranjan, Michael Debabrata Patra, and Shri Shaktikanta Das voted to maintain the policy repo rate at 6.50%, while Prof. Jayanth R. Varma voted to lower it by 25 basis points.
Consequently, 6.75% is the bank rate, 6.25% is the rate for the marginal standing facility (MSF), and 6.25% is the rate for the standing deposit facility. According to Das, the MPC also resolved, with a majority vote of five of the six members, to continue concentrating on the removal of accommodation in order to guarantee that inflation gradually approaches the objective while promoting development.
Drs. Shaktikanta Das, Ashima Goyal, Rajiv Ranjan, Michael Debabrata Patra, and Shashanka Bhide voted to maintain the emphasis on the removal of accommodation in order to support growth while making sure that inflation progressively approaches the goal. Professor Jayanth R. Varma cast his vote in support of remaining impartial.
“Any indications of a generalization of the pressures on food prices will be closely watched by MPC, since this might squander the progress made in reducing core inflation. In order to bring inflation into line with the 4% objective, monetary policy must remain aggressively inflationary. In order to guarantee broader transmission and anchoring of inflation expectations, the MPC also chose to maintain its emphasis on the withdrawal of accommodation, the governor added.
Following the announcement of the Interim Budget on February 1, 2024, this choice remains unaltered for the sixth time in a row. On February 6, 2024, the RBI MPC had its first meeting of the year. Today, February 8, 2024, the six-member MPC finished its deliberations under the direction of RBI Governor Shaktikanta Das. For the fifth time in a row, the RBI kept the repo rate at 6.5% during the most recent MPC.
