RBI MPC Meeting: Growth resilient but inflation remains a risk; key takeaways from RBI policy decision RBI is concerned due to uneven monsoon in some parts of the country which has contributed to an increase in vegetable prices. The central bank expects that headline inflation will increase in the next couple of months. That is why the RBI raised the CPI (consumer price index) inflation, also known as retail inflation, targets to 5.4 per cent for FY24 versus an earlier projection of 5.1 per cent.
"Headline inflation, after reaching a low of 4.3 per cent in May 2023, rose in June and is expected to surge during July-August led by vegetable prices. While the vegetable price shock may reverse quickly, possible El Niño weather conditions along with global food prices need to be watched closely against the backdrop of a skewed southwest monsoon so far. These developments warrant a heightened vigil on the evolving inflation trajectory," RBI Governor Das said.
The current spike in inflation due to a spike in food prices may be temporary and the RBI may revise its inflation forecast in the coming policy meeting on October 4-6. If the central bank spots signs of easing inflation sustainably, it may think about cutting rates too. However, it is too early to hope for rate cuts as the RBI Governor Das hinted the war against inflation continues and the central bank is not ready to drop its guards against it.
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