RBI MPC: Inflation remains a key concern, Das expects relief in Q4 FY25

The RBI Governor Shaktikanta Das in his MPC announcement said that factors like frequent weather disruptions, geopolitical tensions, and financial market volatility pose significant risks to inflation

Reserve Bank of India (RBI) governor Shaktikanta Das announced on December 6 that the Monetary Policy Committee (MPC) has decided to leave the repo rate unchanged at 6.5 per cent for the 11th straight time. The MPC unanimously opted to retain its neutral policy stance, reflecting a cautious approach in light of current economic conditions.

 

Inflation continues to remain a key concern 

Inflation continues to remain a worry for the central bank. “Our effort is to follow the flexible inflation target,” said Das, reiterating the RBI’s dual mandate of ensuring price stability and supporting economic growth. He emphasised the importance of balancing inflation control with the broader goal of fostering growth, stating, “Price stability is very important for the people, but growth is also important. The last mile of disinflation is turning out to be prolonged and arduous for economies.”  Read RBI MPC Meeting LIVE

 

Inflation projections for FY25 

Inflation for FY25 is forecasted at 4.8 per cent, with a rise to 5.7 per cent expected in Q3 before easing to 4.5 per cent in Q4. The projection for Q1 FY26 stands at 4.6 per cent, with a further decline to 4 per cent anticipated by Q2 FY26. Das noted that while food inflation pressures could persist in Q3 FY25, they are expected to ease in Q4 due to the seasonal impact of kharif harvests, a strong rabi season, and sufficient cereal buffer stocks.

 

> Q3FY25: 5.7 per cent

> Q4FY25: 4.5 per cent

> Q1FY26: 4.6 per cent

> Q2FY26: 4 per cent

 

Emerging geopolitical risks for inflation 

Das highlighted the strain high inflation places on consumers, reducing their disposable income and dampening overall economic activity. He also cautioned that factors like frequent weather disruptions, geopolitical tensions, and financial market volatility pose significant risks to inflation.

 

Core inflation rose in October, even as fuel prices showed continued deflation. Food prices also saw unexpected increases.

 

India’s inflation rate reached 6.2 per cent in October 2024, breaching the RBI's tolerance limit, while GDP growth slowed to 5.4 per cent for the July-September (Q2) quarter.

 

Meanwhile, this monetary policy meeting could be Governor Das’s last, as his term concludes on December 10. While he received an extension in 2021 after his initial appointment in December 2018, it is unclear if he will continue in office.