RBI MPC Meeting: RBI inflation target projected at 4.5% in FY25

RBI Inflation targets: RBI in latest bimonthly monetary policy meeting kept repo rate unchanged at 6.5 per cent, growth forecast at 7 per cent and inflation forecast at 4.5 per cent in ongoing fiscal of FY25. RBI governor Shaktikanta Das while shedding light on inflation target said, “Heline inflation softened to 5.1 per cent during January-February 2024, from 5.7 per cent in December. After correcting in January, food inflation edged up to 7.8 per cent in February primarily driven by vegetables, eggs, meat and fish.”

RBI governor also cautioned for being vigilant about food inflation, and said, “Going ahe, food price uncertainties will continue to weigh on inflation outlook. An expected record rabi wheat production in 2023-24, however, will help contain cereal prices. Early indications of a normal monsoon also augur well for kharif season.”

However, talking about targeting inflation, Das said, “Two years ago, around this time, when CPI inflation h peaked at 7.8 per cent in April 2022, elephant in room was inflation. elephant has now gone out for a walk and appears to be returning to forest. We would like elephant to return to forest and remain re on a durable basis. In or words, it is essential, in best interest of economy, that CPI inflation continues to moderate and aligns with target on a durable basis. Till this is achieved, our task remains unfinished.”

Quarterly Inflation Targets

According to RBI, consumer price index (CPI) inflation for 2024-25 is projected at 4.5 per cent with Q1 at 4.9 per cent; Q2 at 3.8 per cent; Q3 at 4.6 per cent; and Q4 at 4.5 per cent. risks are evenly balanced. RBI in past few years has also remained hawkish, reiterating its commitment to bring down heline retail inflation to MPC’s mid-term target of 4 per cent. Consumer Price Index-based (CPI) inflation stood at 5.09 per cent in February, remaining above medium-term target of 4 per cent for 53 months in a row.

Retail inflation was 4.9 per cent in October 2023, which went up to 5.7 per cent in December before easing to 5.09 per cent in February this year. In all se months, food inflation has been consistently higher than heline retail inflation at 6.24 per cent in October, 8.7 per cent in December and 7.76 per cent in February.