RBI MPC sees inflation projection for FY23 at 6.5%, says governor Shaktikanta Das

The Reserve Bank of India (RBI) Monetary Policy Committee lowered that  inflation projection for FY23 to 6.5 percent, governor Shaktikanta Das announced on Wednesday.  In the last MPC meeting inflation projection for the financial year 2022-23 was at 6.7 percent.

The risk have now evenly balanced, stickiness of core inflation is a matter of concern, hence we have to remain unwavering in our commitment to bring down CPI inflation, said DAS.

Das added that inflation is likely to be 5.6 percent in fourth quarter.

The MPC further projected that the CPI inflation for FY24 is at 5.3 percent. With Q1 FY24 seen at 5 percent,  Q2 FY24 seen at 5.4 percent,  Q3 FY24 seen at 5.4 percent and  Q4 FY24 seen at at 5.6 percent.

He further added that

Das further added that food inflation outlook is likely to benefit by bumper Rabi crop output and commodity prices may remain firm with easing of  Covid-19 restrictions in some parts of the world.

Further core inflation could stay at elevated levels, added Das.

A CNBC-TV18 poll had estimated that RBI will lower its inflation forecast for the fiscal by about 10 to 20 basis points, given the cooling off that we have seen in the last few months.

"I think there's a slight buffer, which RBI has maintained on inflation in case there's a weather related shock or oil related shock, which is actually prudent, but this could turn out to be lower and therefore RBI may not need to do more rate hikes as they go into April," said Kaushik Das, Chief Economist, Deutsche Bank.

The Wholesale Price Index for December 2022 fell to a 22-month low of 4.95 percent 5.85 percent in the preceding month and 14.27 percent in the year-ago period, data released by the government showed on Monday. It was also lower than the CNBC-TV18 poll projection of 5.57 percent.

Wholesale inflation measures the changes in price of goods that wholesale businesses sell to and trade in bulk with other businesses. The index tracks factory gate prices before retail prices, unlike consumer price index (CPI), which tracks prices of goods and services purchased by consumers.

December WPI core inflation came in at 3.2 percent while analysts had estimated it to soften to 2.8 percent versus 3.9 percent month-on-month.

The International Monetary Fund (IMF) in its latest Economic Outlook Report global inflation is expected to drop from last year's 8.8 percent to 6.6 percent this year and then fall further to 4.3 percent in 2024. However, it would still remain above pre-pandemic levels of around 3.5 percent.

Most of the countries are also expected to have lower headline CPI inflation in 2023 than last year, the report stated.

The IMF report has also forecast oil prices to fall by around 16 percent this year and non-fuel commodity prices to drop by 6.3 percent on average.