Retail inflation is gradually decreasing, but the cost of food remains a worry according to the RBI Bulletin.

Mumbai: According to the RBI Bulletin, although retail inflation is decreasing, high and unstable food prices are hindering the process of disinflation. Global growth remains strong and central banks are shifting their focus.

June 19th 2024.

Retail inflation is gradually decreasing, but the cost of food remains a worry according to the RBI Bulletin.
In its latest bulletin, the Reserve Bank of India (RBI) has noted a gradual easing of retail inflation, although it has been hindered by volatile and high food prices. The article, titled "State of the Economy", was published in the June 2024 bulletin and highlighted the resilience of global growth in the first quarter of the year. The bulletin also pointed out that many central banks around the world have shifted towards a less restrictive monetary policy stance in response to the drop in inflation.

In India, high-frequency indicators suggest that the real GDP growth in the first quarter of the fiscal year 2024-25 is maintaining the same pace as the previous quarter. The article, authored by a team led by RBI Deputy Governor Michael Debabrata Patra, also mentioned that the outlook for agriculture is looking positive with the early arrival of the southwest monsoon.

According to the authors, headline inflation is gradually decreasing, largely due to the softening of its core component. However, the path of disinflation has been disrupted by the volatility and high prices of food items. The RBI has been tasked by the government to keep retail or headline inflation at 4% with a margin of 2% on either side.

Recently, the RBI's monetary policy committee voted to maintain the policy repo rate at 6.50%, reaffirming its focus on withdrawing accommodation in order to align inflation with the target while supporting growth. The central bank has projected a decrease in inflation from 5.4% in 2023-24 to 4.5% in 2024-25, with risks evenly balanced from factors such as adverse climate events, input costs, and fluctuating crude oil prices.

The RBI clarified that the views expressed in the bulletin article are those of the authors and do not necessarily reflect the views of the central bank.

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