RBI increases FY27 inflation forecast by 50bps to 5.1% amid West Asia war - Moneycontrol.com
The governor said the rate-setting panel decided to keep the core inflation projected at 4.7%, adding that underlying inflation pressure remain benign at this point
The governor said the rate-setting panel decided to keep the core inflation projected at 4.7%, adding that underlying inflation pressure remain benign at this point. The central bank kept the repo rate unchanged at 5.25 percent, with stance remaining "neutral". The Reserve Bank of India (RBI) on June 5 projected consumer price inflation at 5.1 percent for FY27, citing elevated cost pressures arising from the ongoing Iran conflict, governor Sanjay Malhotra said after the central bank's bi-monthly monetary policy review. Malhotra said the Monetary Policy Committee (MPC) retained its projection for core inflation at 4.7 percent, noting that underlying inflationary pressures remain benign for now.
According to the RBI's latest estimates, CPI inflation is expected at 4.2 percent in the first quarter, 5.1 percent in the second quarter, 5.9 percent in the third quarter and 5.4 percent in the fourth quarter of FY27. "Excluding precious metals, core inflation is projected to be lower, suggesting that demand pressures remain contained. These forecasts are subject to upside risks due to global supply chain disruptions and uncertainty about the spatial and temporal distribution of the monsoon. However, adequate stocks of foodgrains and satisfactory reservoir levels provide some comfort," Malhotra said.
The governor added that the central bank had proactively deployed both durable and transient liquidity measures to ensure adequate liquidity in the banking system. The RBI kept the repo rate unchanged at 5.25 percent and maintained its policy stance at "neutral". Malhotra said retail fuel prices have risen by 7.4 percent for petrol and 8.4 percent for diesel. The increase is expected to have a direct impact of around 36 basis points on headline inflation, with additional second-order effects likely to feed into consumer prices over the coming months.
"Pass-through of higher global energy prices is also visible in several other inputs such as commercial LPG, industrial raw materials, chemicals, rubber and plastic products. The second-round impact of higher input costs could exert upside pressure on CPI inflation going forward," he said.
The BriefWire