RBI projects 6.8 pc retail inflation in Q3 due to supply-side bottlenecks

Retail inflation is likely to remain elevated with the Reserve Bank of India on Friday pegging it at 6.8 per cent in the third quarter (October to December) of current fiscal year (2020-21).

Retail inflation is likely to remain elevated with the Reserve Bank of India on Friday pegging it at 6.8 per cent in the third quarter (October to December) of current fiscal year (2020-21). RBI Governor Shaktikanta Das said the outlook for inflation has turned adverse relative to expectations in the last two months.

"The substantial wedge between wholesale and retail inflation points to the supply-side bottlenecks and large margins being charged to the consumer," he said while unveiling its bi-monthly monetary policy review. While cereal prices may continue to soften with the bumper kharif harvest arrivals and vegetable prices may ease with the winter crop, other food prices are likely to persist at elevated levels, he added.

At the same time, crude oil prices have picked up on optimism of demand recovery, continuation of OPEC plus production cuts and are expected to remain volatile in the near-term. Das said cost-push pressures continue to impinge on core inflation which has remained sticky and could firm up as economic activity normalises and demand picks up.

"Taking into consideration all these factors, consumer price index (CPI) inflation is projected at 6.8 per cent for Q3, 5.8 per cent for Q4 and 5.2 per cent to 4.6 per cent in H1 with risks broadly balanced. CPI inflation rose sharply to 7.3 per cent in September and further to 7.6 per cent in October.

The Monetary Policy Committee (MPC) has kept the key policy or the repo rate unchanged at 4 per cent with an accommodative stance to support growth and rein in inflationary pressures. "Our paramount objective is to support growth while ensuring that financial stability is maintained and preserved at all times," said Das. (ANI)

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