RBI revises retail inflation upwards to 5.2% for first half of FY22

The Reserve Bank of India (RBI) on Wednesday revised upwards the CPI-based retail inflation to 5.2% in the first half of the current fiscal year.

The central bank had projected CPI of 5.2 to 5% in the first half (August to September) of 2021-22. The new forecast is an indicator of the hardening of inflation in the economy.

The banking regulator also revised downwards the retail inflation target to 5% for the quarter ended March (Q4 of FY21).

Addressing the bi-monthly MPC (Monetary Policy Committee) meet, RBI Governor Shaktikanta Das said the CPI inflation trajectory is expected to be subject to both upside and downside pressures.

He further pegged the retail inflation to be 5.2% in Q1 and Q2 FY22, 4.4% in Q3, and 5.1% in Q4, respectively.

Also Read: MPC Meet Live Updates: RBI keeps repo rate unchanged at 4%; revises inflation target to 5% in Q4

"Taking into consideration all these factors, the projection for CPI inflation has been revised to 5% in Q4 of FY2021; 5.2% in Q1 FY2021-22; 5.2% also in Q2 of FY22; 4.4% in Q3 and 5.1% in Q4 with risks broadly balanced," Das said.

Earlier, the central bank had projected retail inflation at 5.2% for the 2021 March quarter.

The RBI has the mandate to keep inflation at 4% with a bias of plus or minus 2%.

Moving forward, the food inflation trajectory will critically hinge upon the temporal and special progress of the southwest monsoon during the 2021 season, RBI Governor Shaktikanta Das said while announcing the first monetary policy for the current fiscal (FY22).

Retail inflation has been inching up in recent months, predominantly triggered by high food and fuel prices.

Also Read: RBI retains GDP forecast at 10.5% in FY2021-22

Das noted that there has been some respite from the incidence of domestic taxes on petroleum products through coordinated actions by the Centre and states could provide relief on top of the recent easing of international crude prices.

However, the combination of international commodity prices and logistics costs may push up input price pressures across manufacturing and services, he added.

RBI's MPC also, expectedly, left the interest rates unchanged and maintained an accommodative stance as the economy faces a renewed threat to growth due to the resurgence of coronavirus cases.

The Central bank kept the benchmark repurchase rate, repo rate, unchanged at 4%. The reverse repo rate (3.35%) and the Marginal Standing Facility (4.25) were also kept unchanged.

The rate-setting panel also kept its estimate for economic growth (GDP) unchanged at 10.5% for FY22, stating that global growth is steadily restoring order from the pandemic-triggered downturn, but remains uncertain.