MPC Meet: RBI Raises FY24 Inflation Forecast To 5.4% Amid Soaring Food Prices

The Reserve Bank of India on August 10 raised inflation forecast for this current fiscal year amid sharp surge in vegetable prices. The central bank raised the inflation aim to 5.4% now from 5.1% forecast in June policy. Meanwhile, the MPC today unanimously voted to leave the repo rate unchanged at 6.5% for third consecutive time, as per the announcement of RBI Governor Shaktikanta Das.

RBI expects inflation for Q2 at 6.2%, Q3 at 5.7%, and Q4 at 5.2%, respectively. Earlier this year in June policy, RBI had forecast the Q2 inflation at 5.2%, Q3 at 5.4%, and Q4 and 5.2%. It pegged the inflation rate for the Q1 of next fiscal year at 5.2%.

Ashwin Chadha, CEO, India Sotheby's International Realty said, "The RBI has maintained the status quo on key policy rates, highlighting that risks remain evenly balanced. The primary objective is to curb inflation and bring it within the comfortable range of 4%. This strategic move is anticipated to provide substantial impetus to India's broader growth trajectory. There is an emerging expectation that the RBI might eventually consider a reduction in key interest rates. Once this happens it will be a much-needed breather on EMIs for home loans. It's noteworthy that the demand for residential real estate has been robust since 2021 on the strength of the economy, jobs and growth."

Vimal Nadar, Head of Research, Colliers India said, "In one of the most keenly followed MPC meetings in recent times, RBI has continued to maintain status quo on benchmark lending rates. While the economic growth trajectory of India remains intact, food inflation and the consequential impact on consumer inflation remains a monitorable. The Central bank has factored in an inflation expectancy of 5.4% for FY 2023-24 in the GDP growth projection of 6.5% for the ongoing fiscal year. Notwithstanding spiralling effect of volatile global economic scenario, strong inherent fundamentals of domestic economy will continue to allay the urgency for rate cuts in near future."

RBI's decision to keep the repo rate steady at 6.5% since February this year will continue to bring in respite for EMI dependent homebuyers. Stability in financing costs will also stand to benefit the balance sheet of real estate developers. Real estate construction activity remains buoyant and is reflected in healthy steel consumption and cement production. Stable interest rates, favourable pricing & availability of relevant supply will augur well with first time homebuyers especially in the affordable & mid segments in the upcoming festive season, added Vimal Nadar.

Meanwhile, RBI Governor Shaktikanta Das said on Thursday that the GDP growth projection for 2023-24 has been retained at 6.5% as he said that the risks are evenly balanced. The RBI Governor retained the GDP growth forecast for April-June 2023 at 8.0%.

GDP growth forecast for October-December 2023 retained at 6.0%, for January-March 2024 at 5.7%, and GDP growth forecast for April-June 2024 pegged at 6.6%.
Shaktikanta Das projected growth for 2023-24 at 6.5% in the earlier two policies in June and April.

It is worth mentioning that the Standing Deposit Facility rate also retained at 6.25% and Marginal Standing Facility rate, Bank Rate also retained at 6.75%.