The retail inflation in India though is in RBI’s 2-6 per cent comfort level but is above the ideal 4 per cent scenario.
The latest eased month-on-month retail inflation comes on the heels of RBI having maintained the status quo in the repo rate for the sixth straight occasion.
Barring the recent pauses, the RBI has raised the repo rate by 250 basis points cumulatively since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
At the latest monetary policy meeting, the RBI pegged India’s retail inflation projections for 2024-25 at 4.5 per cent, with Q1 at 5.0 per cent, Q2 at 4.0 per cent, Q3 at 4.6 per cent, and Q4 at 4.7 per cent, with risks evenly balanced.
Following are some of the excerpts of views from analysts and experts on the February retail inflation numbers:SBI Research:
CPI inflation is expected to remain slightly above 5.0 per cent till May and declining thereafter to 3 per cent in July. Inflation is expected to stay below 5 per cent beginning November till the end of FY25. Spatial heatmap shows that the largest weighted contribution to the current reading of CPI came from Maharashtra and Uttar Pradesh.Dharmakirti Joshi, Chief Economist, CRISIL Ltd:
We expect CPI inflation to continue to soften next fiscal to 4.5% from an estimated 5.5% this fiscal, supported by the assumption of a normal monsoon, softer domestic demand, and benign global oil prices.
Given all this, the MPC might hold the repo rate steady till at least its June policy review.
RajSinha, Chief Economist, CareEdge:
In February, headline inflation held steady at 5.1 per cent, marking the sixth consecutive month within the RBI’s target band.
Looking ahead, a favourable base effect is expected to persist until July 2024, helping absorb potential upward risks to price pressures to a certain extent.
Given that the RBI Governor has been highlighting the aim of getting inflation to 4 per cent on a durable basis, the policy rates are likely to be kept on hold in the upcoming policy meeting, with no change in stance.
Vivek Rathi, National Director Research, Knight Frank India:
Excluding food, prices in all other categories have moderated compared to last year, with fuel inflation showing a decline of 0.8%. Core inflation is also decreasing, alleviating pressure on households. And while still high, the gradual decline in inflation supports growth in consumption-driven sectors, including real estate and the broader economy.