The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) has projected inflation for FY24 to drop to 5.2 per cent from 5.3 per cent forecast in February policy, governor Shaktikanta Das announced on Thursday.
The RBI MPC has projected inflation for the first quarter of FY24 at 5.1 percent, 5.4 percent for the second and third quarters and 5.2 percent for the fourth quarter, Das announced.
Meanwhile, in a surprise move, Das also said that the monetary policy has decided to keep the repo rate unchanged at 6.5 per cent with readiness to act should the situation so warrant.
The rate hike has been paused after six consecutive rate increases aggregating to 250 basis points since May 2022.
The governor on Thursday highlighted that while the projection for FY24 points to a softening of inflation, the war against inflation has to continue untill there's a durable decline.
This is particularly important given the adverse climate conditions and risks to global commodity prices.
"Adverse climatic conditions are a risk to the future inflation trajectory. Milk prices are also likely to remain firm going into the summer season due to tight demand-supply balance and fodder cost pressures. The rising uncertainty in international financial markets and imported inflation pressures need to be monitored closely," he said.
For the next fiscal, RBI projected a growth rate of 6.5 per cent as compared to 6.4 per cent estimated in February.
The RBI Governor added that Q1 GDP is expected to grow at 7.8 per cent, Q2 at 6.4 per cent, Q3 at 6.1 per cent, and Q4 at 5.9 per cent.
"Today’s RBI policy is surely a short-term relief for the market as repo rate remains unchanged at 6.5% post six consecutive rate hikes. However, inflation trends need to be closely watched. Keeping in view the FY24 inflation projection at 5.2% with CPI at 5.1% in Q1FY24, inflation is still not out of the woods. Passive investors can remain cautiously optimistic about the market. The key rationale behind the pause in rate hikes is improving global sentiments and moderating mounting inflation," said Palka Arora Chopra, Senior Vice President, Mastertrust.
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