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RBI raises inflation projection from 4.5% to 5.7% for FY23 calculating crude at $100/bbl

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RBI raises inflation projection from 4.5% to 5.7% for FY23 calculating crude at $100/bbl

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The Reserve Bank of India’s Monetary Policy Committee (MPC) has revised its CPI inflation estimates for the financial year 2022-2023 to 5.7 percent against its earlier projection of 4.5 percent, the central bank Governor Shaktikanta Das announced on Friday.

RBI raises inflation projection from 4.5% to 5.7% for FY23 calculating crude at $100/bbl
The Reserve Bank of India’s Monetary Policy Committee (MPC) has revised its CPI inflation estimates for the financial year 2022-2023 to 5.7 percent against its earlier projection of 4.5 percent, the central bank Governor Shaktikanta Das announced on Friday.
The inflation in the first quarter of FY23 is projected at 6.3 percent, followed by 5 percent in the second quarter, the governor said. In the September to December and January to March quarters, the economy is expected to witness consumer price index (CPI) inflation at 5.4 percent and 5.1 percent, respectively, he added.
“Given excessive volatility in global crude oil prices and extreme uncertainty due to geopolitical tensions, any projection of growth and inflation is fraught with risk and is contingent on future oil and commodity price developments,” RBI Governor said in his first RBI Monetary Policy address of the fiscal.
He noted crude oil prices remain elevated and the RBI has assumed the rate at $100/barrel and a normal monsoon during 2022 to estimate CPI and growth. ​
On the inflation projection, which is higher than the assessment during February, Das economic activity, although recovering, is barely above its pre-pandemic level. Heightened geopolitical tensions since February-end have upended the earlier narrative and considerably clouded the inflation outlook for the year.
“Against this backdrop, the Monetary Policy Committee (MPC) decided to retain the repo rate at 4 percent. It also decided to remain accommodative while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward while supporting growth,” he said.
On the food price front, a likely record rabi harvest would help to keep domestic prices of cereals and pulses in check, RBI Guv said, adding that global factors such as loss of wheat supply from the Black Sea region and unprecedented high international prices could put a floor under domestic prices of wheat.
Edible oil price pressures are likely to remain elevated in the near term due to export restrictions by key producers as well as loss of supply from Black Sea region, Das said.
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