India’s RBI sees inflation at 4.5% in H1 FY ’24/’25

India’s headline inflation is expected to average 4.5 per cent in the second half of the fiscal year, according to the Reserve Bank of India’s (RBI) latest bulletin.

The RBI credits this forecast to lower crude oil prices, although volatility in food prices could pose a challenge.

The RBI noted that recent declines in vegetable prices may indicate a reversal of the persistent food inflation seen in the first quarter of 2024-25. India’s retail inflation rose to 3.65 per cent in August, driven by soaring vegetable prices.

Food prices, which make up nearly half of retail inflation, increased by 5.66 per cent in August compared to 5.42 per cent in July. The RBI targets inflation at four per cent with a tolerance band of two percentage points.

The central bank warned that an unfavorable base effect may impact September’s inflation print. However, it expects household consumption to grow faster in the July-September period as headline inflation eases.

The RBI, which has maintained its key interest rate unchanged for nine consecutive meetings, is anticipated to proceed cautiously with monetary policy easing. The next monetary policy meeting is scheduled for October 7-9.

Attribution: Reuters

Subediting: M. S. Salama