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RBI projects CPI inflation at 5.3% for FY22, says likely to peak in Q4

economy | IST

RBI projects CPI inflation at 5.3% for FY22, says likely to peak in Q4


RBI Monetary policy meet: Headline CPI inflation will peak in Q4FY22, Governor Shaktikanta Das said, adding that it can soften in the consequent quarter. The Guv also projected the CPI inflation for FY22 at 5.3 percent, in line with the previous projections.

The Reserve Bank of India (RBI) has projected the Consumer Price Index (CPI) inflation at 5.3 percent for the financial year 2022, the same it had projected in the October meeting. Governor Shaktikanta Das announced the estimation while discussing the outcomes of the bi-monthly policy meet.
Das said the headline inflation might peak in the fourth quarter of FY22. While in Q3 FY22, the inflation is projected at 5.1 percent, it can peak to 5.7 percent in Q4 FY22. It will cool to 5 percent in the Q1 and Q2 of FY23, he said.
Headline CPI inflation picked up in October 2021 and the persistence of high core inflation (ex-food and fuel) is an area of concern, Das said. However, he added, the inflation trajectory will be in line with our earlier projections.
In the previous monetary policy meeting, the committee had increased the inflation projection for the first quarter of FY23 to 5.2 percent. But now it could soften to 5 percent. Das also said the inflation print for the rest of the year will be high due to the base effect.
CPI inflation estimates | RBI MPC meet
The Consumer Price Index or retail index inflation measures the average change in prices over time that consumers pay for goods and services. It is the most widely used measure of inflation and reflects the effectiveness of the government's economic policy.
The economy is not yet strong enough for self-sustaining, the governor said while announcing policy decisions, which is why we need policy support, he added.
The Monetary Policy Committee on Wednesday voted 5:1 to maintain an accommodative stance and keep the repo rates unchanged at 4 percent as recovery remained uneven. The central bank has kept the MSF rate and bank rate unchanged at 4.25 percent. And reverse repo rate remains unchanged at 3.35 percent.
We are better prepared to deal with economic disruption from covid, if any, Das said, adding that the prospects of economic activity are steadily improving. Though he said, private consumption is still below the pre-pandemic levels, urban demand is showing signs of strengthening. Rural demand and farm employment have picked up, he said, and government consumption is also rising from October 2021.
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