New Delhi: Reserve Bank of India’s (RBI’s) Governor Shaktikanta Das, while addressing the first Monetary Policy Committee (MPC) statement for FY23 on Friday, said that the consumer price index (CPI) inflation is seen averaging to 5.7 per cent in FY23.
Presenting the MPC’s bi-monthly monetary policy statement, Das said, “Heightened geopolitical tensions have clouded the earlier projections.”
According to the latest estimates, CPI inflation is seen averaging to 6.3 per cent in Q1 or first quarter (April-June 2022), 5.8 per cent in Q2 or second quarter (July-September 2022), 5.4 per cent in Q3 or third quarter (October-December 2022), and 5.1 per cent in the fourth quarter or Q4 (January-March 2023) of the current fiscal year.
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The RBI is mandated to keep inflation within the range of 2-6 per cent, while the CPI-based inflation rate in February stood at 6.07 per cent. The rate in January was 6.01 per cent.
The governor said that the key commodity prices are likely to remain on higher side and input costs will remain high across sectors.
Since the previous MPC meeting in February, the expected positive benefits of the ebbing Omicron wave have been offset by the sharp escalation in geopolitical tensions.
In his speech Das said the supply of crude oil, natural gas, commodities, and palladium has been affected because of the ongoing Russia-Ukraine conflict. The central bank has projected crude oil prices at $100 per barrel for the current financial year.
Das also clarified that edible oil prices are likely to stay elevated in the near term and that spike in crude oil prices since end of February 2022 due to the war poses a substantial risk to inflation.
According to the MPC announcement, “The hardening of crude oil prices, however, presents a major upside risk to the inflation outlook. Core inflation remains elevated at tolerance testing levels, although the continuing pass through of tax cuts relating to petrol and diesel last November would help to moderate input cost pressures to some extent. The transmission of input cost pressures to selling prices remains muted in view of the continuing slack in demand. Further, as risks from Omicron wane and supply chain pressures moderate, there could be some softening of core inflation.”
Most analysts have also expected the RBI to revise downwards inflation forecasts, acording to news reports.