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Retail inflation to remain elevated in third quarter: RBI

RBI Governor Shaktikanta Das said that inflation is likely to remain elevated, barring transient relief in the winter months from prices of perishables.

Retail inflation to remain elevated in third quarter: RBI

(Photo: AFP)

As the pandemic-hit Indian economy continues to struggle, the Reserve Bank of India on Friday said retail inflation is likely to remain elevated and projected the consumer price index (CPI) for the October-December quarter of FY21 at 6.8 per cent.

While presenting the outcome of RBI’s Monetary Policy Committee (MPC) meeting, RBI Governor Shaktikanta Das said that inflation is likely to remain elevated, barring transient relief in the winter months from prices of perishables.

However, retail inflation is projected to be 5.8 per cent in the fourth quarter of 2020-21.

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Das noted that CPI inflation rose sharply to 7.3 per cent in September and further to 7.6 per cent in October.

According to him, with some evidence that price pressures are spreading, the outlook for inflation has turned adverse in relation to expectation in the last two months.

“While cereal prices may continue to soften with the bumper Kharif harvest arrivals and vegetable prices may ease with winter crop, other food prices are likely to persist at elevated levels. Cost-push pressures continue to impinge on core inflation which could remain sticky.”

“Taking into consideration all these factors, the CPI inflation is projected at 6.8 per cent for Q3 FY2020-21; 5.8 per cent for Q4 FY2020-21 and 5.2-4.6 per cent in H1 of FY2021-22 with risks broadly balanced,” Das said.

The MPC has kept the key policy or the repo rate unchanged at 4 per cent with an accommodative stance to support growth and rein in inflationary pressures.

“It also decided to continue with the accommodative stance of monetary policy as long as necessary – at least through the current financial year and into the next year – to revive growth on a durable basis and mitigate the impact of COVID-19, while ensuring that inflation remains within the target going forward,” Das said.

“Our paramount objective is to support growth while ensuring that financial stability is maintained and preserved at all times,” he added.

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