RBI MPC Meet: RBI keeps FY25 inflation forecast unchanged at 4.8%

The Reserve Bank of India's Monetary Policy Committee (MPC) on February 7 kept its inflation forecast unchanged for the current financial year. It has kept the Consumer Price Index (CPI) inflation projection at 4.8 percent.

The first MPC under the new RBI Governor Sanjay Malhotra has revised its CPI inflation forecast for Q4 FY25 to 4.4 percent, down from the previous forecast of 4.5 percent.

Assuming a normal monsoon, CPI inflation for FY26 has been projected at 4.2 percent, with Q1 at 4.5 percent, Q2 at 4 percent, Q3 at 3.8 percent and Q4 at 4.4 percent, the RBI Governor added. "The risks are evenly balanced," he said.

"Headline inflation after moving above the upper tolerance band in October, has since registered a sequential moderation in November and December, standing at 5.2 percent now. Going ahead, food inflation pressures, absent any supply side shocks, should see a significant softening due to good kharif crop production, winter easing and a favourable rabi crop prospect. Core inflation is expected to rise but remain moderate. Rising uncertainties in global financial markets, coupled with continuing volatility in the global energy prices and adverse weather events present upside risks to the inflation projectory," he further said.

India's retail inflation eased to a four-month low of 5.22 percent in December, the fourth consecutive month that prices remained over the 5 percent mark.

The RBI has reduced its repo rate by 25 bps to 6.25 percent, the first rate cut since May 2020. It has kept its stance at 'Neutral'.

In May 2020, the RBI had lowered the repo rate to 4 percent to cushion the economy from the COVID-19 pandemic's impact. Since then, the central bank has raised the repo rate seven times to 6.5 percent.

Further, the central bank projected GDP growth for the next fiscal at 6.7%.