RBI Monetary Policy: MPC keeps FY25 inflation forecast unchanged at 4.5%

  • RBI Monetary Policy: The RBI maintains its 4.5% inflation projection for 2024-2025, with a focus on balancing risks. Governor Shaktikanta Das noted recent inflation decreases and projected a rise in September due to unfavourable base effects and food prices.

Dhanya Nagasundaram
Published9 Oct 2024, 10:18 AM IST
RBI Monetary Policy: MPC keeps FY25 inflation forecast unchanged at 4.5%
Photo: Aniruddha Chowdhury/Mint
RBI Monetary Policy: MPC keeps FY25 inflation forecast unchanged at 4.5% Photo: Aniruddha Chowdhury/Mint

RBI Monetary Policy meeting: The Reserve Bank of India (RBI) maintained its 4.5% inflation projection for 2024–2025 with Q2 at 4.1%, Q3 at 4.8% and Q4 at 4.2%. The consumer price index (CPI) inflation for the first quarter of the next financial year 2025-26 is projected at 4.3%. The risks are evenly balanced, said Governor of the RBI, Shaktikanta Das today.

RBI Governor Shaktikanta Das noted that there was a significant decrease in headline inflation to 3.6% and 3.7% in July and August, from 5.1% in June, mainly due to the base effect in July. Retail inflation in September likely to see big jump due to unfavourable base, pick up in food price momentum, highlighted RBI Governor Shaktikanta Das in RBI October monetary policy.

 

Also Read | RBI Monetary Policy Meeting LIVE: FY25 GDP growth estimates retained at 7.2%

The persistent impact of reduced onion, potato, and chana dal (gram) production in 2023-24, along with other factors, is responsible for this. Nevertheless, it is anticipated that headline inflation will gradually decrease in the fourth quarter of this fiscal year, believes RBI Governor Shaktikanta Das.

Food inflation showed some correction during last two months, but there were notable differences within the various food subgroups. The fuel group experienced deflation due to lower electricity and LPG prices, while core inflation increased in July and August. It is anticipated that the CPI for September will show a substantial increase because of unfavourable base effects and a rise in fuel prices.

Also Read | RBI MPC Outcome: India’s real GDP growth projections for FY25 retained at 7.2%

“Food inflation, however, is expected to ease by Q4:2024-25 on better kharif arrivals and rising prospects of a good rabi season. Sowing of key kharif crops are higher than last year and the long-period average. Sufficient buffer stocks for cereals are available for ensuring food security. Adequate reservoir levels, the likelihood of a good winter and favourable soil moisture conditions augur well for the ensuing rabi season, though adverse weather events remain a risk,” said the RBI Governor.

Shaktikanta Das also mentioned the importance of closely monitoring the recent increase in key commodity prices, particularly metals and crude oil.

RBI October Monetary Policy Outcome

During the Monetary Policy Committee (MPC) meeting, RBI Governor Shaktikanta Das announced that the central bank has opted to maintain the policy repo rate at 6.5% for the 10th consecutive time, on Wednesday.

“Keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50%,” the RBI Governor stated.

The decision received a majority vote of 5 out of 6 MPC members. The standing deposit facility (SDF) rate remains unchanged at 6.25%, while the marginal standing facility (MSF) rate and the bank rate are both held at 6.75%.

Das indicated a change in the RBI's monetary policy stance by transitioning to a neutral approach.

Also Read | RBI keeps repo rate unchanged at 6.5%, changes stance to ‘neutral’

"The MPC also decided to change the monetary policy stance to ‘neutral’ and to remain unambiguously focused on a durable alignment of inflation with the target, while supporting growth.

These decisions are in consonance with the objective of achieving the medium term target for CPI inflation of 4% within a band of +/- 2%, while supporting growth," said the RBI Governor.

The change in stance gives the MPC flexibility and allows it to keep an eye on the still-incomplete disinflation process. Uncertainties about increased global geopolitical risks volatile financial markets, unfavourable weather patterns, and the recent spike in food and metal prices are the main sources of risk. The RBI MPC will consequently continue to monitor the changing inflation forecast.

Voting in favour of maintaining the policy repo rate at 6.50% were Shri Saugata Bhattacharya, Professor Ram Singh, Dr. Rajiv Ranjan, Dr. Michael Debabrata Patra, and Shri Shaktikanta Das. In favour of a 25 basis point drop in the policy repo rate, Dr. Nagesh Kumar cast his vote.

Also Read | Stock Market Today: Sensex, Nifty extends gains as RBI changes stance to neutral

Dr. Michael Debabrata Patra, Dr. Nagesh Kumar, Professor Ram Singh, Dr. Rajiv Ranjan, Dr. Saugata Bhattacharya, and Dr. Shaktikanta Das voted in favor of shifting from a withdrawal of accommodation to a "neutral" stance and staying steadfastly focused on a long-term alignment of inflation with the target while promoting growth.

The MPC's upcoming meeting is set to take place from December 4 to 6, 2024.

Also Read | RBI MPC on UPI: Transaction limits for UPI Pay 123 and UPI Lite raised

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.

Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.

MoreLess
First Published:9 Oct 2024, 10:18 AM IST
Business NewsMarketsStock MarketsRBI Monetary Policy: MPC keeps FY25 inflation forecast unchanged at 4.5%

Most Active Stocks

Tata Steel share price

149.70
07:18 PM | 1 NOV 2024
1.05 (0.71%)

Indian Oil Corporation share price

145.00
07:19 PM | 1 NOV 2024
2.3 (1.61%)

Tata Power share price

445.20
07:19 PM | 1 NOV 2024
5.15 (1.17%)

Bandhan Bank share price

183.65
07:10 PM | 1 NOV 2024
1.4 (0.77%)
More Active Stocks

Market Snapshot

  • Top Gainers
  • Top Losers
  • 52 Week High

Rainbow Childrens Medicare share price

1,545.00
06:59 PM | 1 NOV 2024
-67.25 (-4.17%)

ICICI Securities share price

833.45
06:59 PM | 1 NOV 2024
-32.85 (-3.79%)

Vijaya Diagnostic Centre share price

966.70
06:59 PM | 1 NOV 2024
-30.35 (-3.04%)

Narayana Hrudayalaya share price

1,235.60
06:59 PM | 1 NOV 2024
-36.75 (-2.89%)
More from Top Losers

Brigade Enterprises share price

1,244.80
07:19 PM | 1 NOV 2024
71.75 (6.12%)

PCBL share price

432.15
07:17 PM | 1 NOV 2024
21.35 (5.2%)

Piramal Pharma share price

281.85
07:17 PM | 1 NOV 2024
13.45 (5.01%)

Jubilant Pharmova share price

1,273.00
06:59 PM | 1 NOV 2024
60.65 (5%)
More from Top Gainers

Recommended For You

    More Recommendations

    Gold Prices

    • 24K
    • 22K
    Bangalore
    80,565.000.00
    Chennai
    80,571.000.00
    Delhi
    80,723.000.00
    Kolkata
    80,575.000.00

    Fuel Price

    • Petrol
    • Diesel
    Bangalore
    102.92/L0.00
    Chennai
    101.23/L0.00
    Kolkata
    104.95/L0.00
    New Delhi
    94.77/L0.00

    Popular in Markets

      HomeMarketsPremiumInstant LoanMint Shorts