Food prices ‘slowing pace of disinflation’: MPC

Of them, Das, Patra, Bhide, and Ranjan voted to keep policy repo rate unchanged at 6.5% and to remain focused on withdrawal of accommodation, while Goyal and Varma voted to reduce the policy repo rate by 25 basis points and for a change in the policy stance to neutral from the present withdrawal of accommodation.

Though headline inflation has been sequentially moderating since February, albeit in a narrow range from 5.1% in February to 4.8% in April, food inflation still remains elevated due to persistence of inflation pressures in vegetables, pulses, cereals, and spices.

Accordingly the MPC has forecast CPI inflation for FY25 at 4.5% with Q1 at 4.9%; Q2 at 3.8%; Q3 at 4.6%; and Q4 at 4.5%. Goyal voting for 25 bps rate cut said headline inflation has been around 5% since

January while core inflation has been below 4% since December 2023, which means volatile commodity prices, El Nino and heat waves have not been able to reverse the approach to target.

“The headline inflation projection of 4.5% for FY25 gives an average real repo rate of 2% implying that the real repo rate will be above neutral for too long if the repo rate stays unchanged. Falling inflation has raised real repo above unity. This will reduce real growth rate with a lag,” she said.