MPC retains inflation forecast for FY23 but highlights external uncertainty

The projections of inflation for FY23 are based on the assumption of an average crude oil price of $105 per barrel and a normal monsoon

The Reserve Bank of India’s Monetary Policy Committee (MPC) has retained its forecast for retail inflation at 6.7 per cent for the current financial year, but revised the numbers for the current and the third quarters (Q2 and Q3) of financial year 2022-23 (FY23). 

It, however, said the spillover of geopolitical shocks was importing considerable uncertainty to the inflation trajectory.

The committee now feels that the consumer price index (CPI)-based inflation rate for Q2 would be a bit less at 7.1 per cent than the 7.4 per cent forecast earlier. However, the Q3 inflation rate would now be a bit higher than