Monetary Policy: RBI ups inflation target for FY23 to 5.7% on rising global prices amidst geo-political tensions

The Reserve Bank of India on Friday raised the retail inflation target for the current financial year to 5.7 percent on the back of rising global prices amidst the ongoing geo-political tensions, even as it expected the prices of cereals and pulses to soften on prospects of good winter crop harvest.

"Global food prices along with metal prices have hardened significantly. Economy is grappling with a sharp rise in inflation... Inflation is now projected at 5.7 per cent in 2022-23 with Q1 at 6.3 per cent; Q2 at 5 per cent; Q3 at 5.4 per cent and Q4 at 5.1 per cent," RBI Governor Shaktikanta Das said while unveiling the first monetary policy review for the current fiscal year.

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In its earlier policy review in February, the RBI had projected retail inflation to be at 4.5 percent in 2022-23.

The apex bank kept the benchmark interest rate -- repo, at which it lends short-term money to banks -- unchanged at 4 percent.

The Monetary Policy Committee (MPC) also decided unanimously to remain accommodative, while focussing on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.

This is the 11th time in a row that the Monetary Policy Committee (MPC) headed by Das has maintained the status quo.

"It may, however, be noted that given the economic volatility on global crude oil prices... The evolving geopolitical tensions, any projection of growth and inflation is fraught with risk," Das said.

RBI, however, hoped that the likely good harvest from the rabi (winter) crop will keep prices of cereals and pulses under check.

The Reserve Bank has been mandated to keep retail inflation at 4 percent with a bias of 2 percent on either side.