'Inflation remains main concern against rate cuts'

New Delhi, Apr 19: Inflation continues to remain the main concern for the Reserve Bank of India's monetary policy committee members before it goes ahead and loosens its stance on key interest rates.

As per the Minutes of the latest monetary policy meeting released on Friday, there have been several mentions of uncertainties around inflation. Going ahead, food price uncertainties would continue to weigh on the inflation outlook, it said.

The increasing incidence of climate shocks remains a key upside risk to food prices.

"Low reservoir levels, especially in the southern states and outlook of above normal temperatures during April-June, also pose concern. Tight demand-supply conditions in certain pulses and the prices of key vegetables need close monitoring," as per the Minutes.

"The recent firming up of international crude oil prices warrants close monitoring. Geo-political tensions and volatility in financial markets also pose risks to the inflation outlook."

Taking into account these factors and assuming a normal monsoon, India's retail inflation for 2024-25 is projected at 4.5 per cent with Q1 at 4.9 per cent; Q2 at 3.8 per cent; Q3 at 4.6 per cent; and Q4 at 4.5 per cent.

Pressure in food prices has been interrupting the ongoing disinflation process in India, and posing challenges for the final descent of inflation trajectory to the 4 per cent target, as per minutes of RBI's monetary policy meeting that was held earlier this month.

Unpredictable supply-side shocks from adverse climate events and their impact on agricultural production as well as geo-political tensions and spillovers to trade and commodity markets add uncertainties to the outlook, said the minutes.

The RBI typically conducts six bimonthly meetings in a financial year, where it deliberates interest rates, money supply, inflation outlook, and various macroeconomic indicators. The other five meetings are scheduled for June 5-7, 2024; August 6-8, 2024; October 7-9, 2024; December 4-6, 2024; and February 5-7, 2025.

The RBI is currently focused on bringing down the inflation to 4 per cent target on a durable basis.