The Reserve Bank on Friday retained the inflation forecast for 2023-24 at 5.4%, and vowed to take timely measures to prevent any spillovers of global food and fuel price shocks.
Stressing that the Reserve Bank has identified high inflation as a major risk to macroeconomic stability and sustainable growth, Governor Shaktikanta Das said the September retail inflation number may be lower than August and July prints.
The headline inflation based on Consumer Price Index (CPI) moderated to 4.6% in first quarter of 2023-24 as compared to 7.3% in the same period a year ago.
"A significant easing of inflation pressures from its exceptionally high level in July and August is expected to materialise in September as the impact of fleeting food price shocks wane", Das said.
RBI has projected the CPI inflation at 5.4% for 2023-24, with Q2 at 6.4%, Q3 at 5.6% and Q4 at 5.2%. The risks are evenly balanced. CPI inflation for the first quarter of 2024-25 is projected at 5.2%.
In August monetary policy too, the inflation for the current fiscal was projected at 5.4%.
Das said while growth remains on track, the declining trend in inflation was interrupted in July-August 2023 due to price shocks in certain food items.
Volatile energy and food prices in the wake of lingering geopolitical tensions and adverse weather conditions render uncertainty to the inflation outlook.
"We remain vigilant of the evolving inflation dynamics. I would like to emphatically reiterate that our inflation target is 4% and not 2 to 6%".
"Our aim is to align inflation to the target on a durable basis, while supporting growth", the governor said.
He further said while near-term inflation is expected to soften on the back of vegetable price correction, especially in tomatoes, and the reduction in LPG prices; the future trajectory will be conditioned by a number of factors, including Kharif crop sown area, EL Nino conditions and demand supply mismatches.
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