Mumbai: The Reserve Bank of India (RBI) on Wednesday lowered retail inflation projection in the range of 2.7-3.2% for the second half of the current fiscal, citing normal monsoon and moderate food prices.
The broad-based weakening of food prices imparts downward bias to the headline inflation trajectory going forward, the RBI said in its fifth bi-monthly monetary policy announced here.
Meanwhile, the RBI maintained status quo in monetary policy announcement, leaving the key interest rate unchanged at 6.5%. In its previous policy review in October, the apex bank had projected retail inflation to be around 3.9-4.5% in the October-March period of 2018-19.
In contrast to food prices, there has been a broad-based increase in inflation in non-food groups. International crude oil prices declined sharply since the last policy and the price of the Indian crude basket collapsed to below $60 a barrel by November end, after touching $85 a barrel in early October.
“Taking all these factors into consideration and assuming a normal monsoon in 2019, inflation is projected at 2.7-3.2% in H2 FY2018-19 and 3.8-4.2% in H1 FY2019-20, with risks tilted to the upside," the RBI said.
It said the projected inflation path remained unchanged after adjusting for the HRA impact of central government employees as this impact dissipated completely from December 2018 onwards. Although recent food inflation prints had surprised on the downside and prices of petroleum products had softened considerably, it was important to monitor their evolution closely and allow heightened short-term uncertainties to be resolved by incoming data, it added.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.