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Informist, Thursday, May 29, 2025

 

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--RBI: CPI eased but pace of disinflation hurt by high, volatile food prices 
--RBI: FY26 CPI inflation projected at 4% with risks evenly balanced 
--RBI:Global fincl mkt volatility a risk to growth, upside risk to inflation 
--RBI: Trade fragmentation a risk to growth, upside risk to inflation 
--RBI: Supply chain disruptions a risk to growth, upside risk to inflation 
--RBI:Climate-induced uncertainties risk to growth, upside risk to inflation 
--RBI: Headline inflation expected to ease and move towards target in FY26 
--RBI: Food inflation likely to soften going forward on better rabi crop 
--RBI:High farm output on likely good monsoon augurs well for FY26 inflation 
--RBI: Easing supply chain pressures augur well for FY26 inflation outlook 
--RBI:Softening global commodity prices bode well for FY26 inflation outlook 
--RBI: Monetary policy committed towards achieving durable price stability
--RBI: Evolving trade dynamics, weather conditions to impact disinflation

 

NEW DELHI – Retail inflation in India has moderated consistently over the last few months, but price stability faces several risks ahead, mainly from prolonged geopolitical conflicts and evolving trade and weather conditions, the Reserve Bank of India said in its annual report for 2024-25 (Apr-Mar).

 

CPI inflation moderated to 4.6% in FY25 from 5.4% in the previous year. In April, headline inflation fell to a 69-month low of 3.16%. The central bank said, while headline inflation moderated, the pace of disinflation was impeded by high and volatile food inflation. "With inflation falling below the target in February and March 2025, supported by a sharp fall in food inflation, there is now greater confidence about a durable alignment of headline inflation with the target of 4.0% over a 12-month horizon," the RBI said. The central bank has projected CPI inflation to moderate to 4.0% in FY26.

 

Global financial market volatility, geopolitical tensions, trade fragmentation, supply chain disruptions, and climate-induced uncertainties pose risks to the inflation outlook, the RBI said. The number of climate shocks have increased in recent years, which warrants careful monitoring of the food price outlook, the central bank said. On the other hand, easing of supply chain pressures, softening of global commodity prices, and higher agricultural production on the back of likely above-normal monsoon rains augur well for the inflation outlook this year. A better rabi crop is also likely to soften food inflation and lead to gradual moderation in headline inflation, the RBI said.

 

With the inflation outlook seen benign, the RBI's Monetary Policy Committee has lowered interest rates in 2025 to support growth. The MPC has reduced the repo rate by 25 basis points each in February and April to 6.00%, and is expected to cut rates further by at least 50 bps more this year.

 

"Monetary policy is committed towards achieving durable price stability, which is a necessary prerequisite for high growth on a sustained basis," the RBI said. "The Reserve Bank will undertake liquidity management operations in sync with the monetary policy stance and keep system liquidity adequate to meet the needs of the productive sectors of the economy," the report said.  End

 

Reported by Shubham Rana

Edited by Saji George Titus

 

 

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