RBI may keep rates tight till further clarity on food inflation risk, say economists

Economists anticipate the RBI-led Monetary Policy Committee to uphold or raise interest rates in the forthcoming monetary policy until clarity emerges regarding food inflation risks. Strong growth indicators provide leeway for the central bank to maintain relatively higher rates. \r

India's headline retail inflation dipped to 4.75 percent in May, with the RBI projecting CPI inflation for various quarters. Governor Shaktikanta Das emphasized vigilance against inflation risks, particularly from food inflation. Analysts predict further easing of inflation in the upcoming months before facing upward pressure in the second half of FY25. \r

The MPC, maintaining rates unchanged since over a year, seeks sustainable signs of inflation moderation. The current repo rate stands at 6.5 percent, with retail inflation showing a marginal decline but not reaching the desired levels.