Minutes Show Inflation Still Expected to Improve

RBI Minutes for their early October rate decision: rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR1155MINUTESMPCA747B17FC38A4EE593AC2CAF6A97C0E2.PDF

Highlights:

• Near-term inflation outlook is expected to improve on the back of vegetable price correction and the recent reduction in LPG prices.
• The future trajectory of inflation will be conditioned by a number of factors like lower area sown under pulses, dip in reservoir levels, El Niño conditions and volatile global energy and food prices.
• CPI inflation is projected at 5.4 per cent for 2023-24, with Q2 at 6.4 per cent, Q3 at 5.6 per cent and Q4 at 5.2 per cent, with risks evenly balanced. CPI inflation for Q1:2024-25 is projected at 5.2 per cent
• Real GDP growth for 2023-24 is projected at 6.5 per cent, with Q2 at 6.5 per cent, Q3 at 6.0 per cent, and Q4 at 5.7 per cent, with risks evenly balanced. Real GDP growth for Q1:2024-25 is projected at 6.6 per cent
• MPC resolved to remain on high alert. MPC noted that headline inflation is ruling above the tolerance band and its alignment with the target is getting interrupted. Hence, monetary policy needs to remain actively disinflationary
• All members voted to keep the policy repo rate unchanged, but Varma express reservations about focusing on withdrawal of accommodation to ensure that inflation progressively aligns to the target.