The Reserve Bank on Tuesday lowered its inflation projection to 5.8 per cent for January 2016 and said it will aim to bring it down further to 5 per cent by the end of next financial year.
RBI had earlier projected inflation at 6 per cent by January.
In its fourth bi-monthly monetary policy review in the current fiscal where it effected a higher-than-expected cut of 0.5 per cent in repo rate to 6.75 per cent, RBI said that “inflation is expected to reach 5.8 per cent in January 2016, a shade lower than the August projection”.
Inflation has been trending lower for quite some time with the Consumer Price Index (CPI) based retail inflation falling to a record low of 3.66 per cent in August. The Wholesale Price Index (WPI) based inflation remained in the negative zone at (-)4.95 percent on cheaper food items and overall fall in commodity prices.
RBI Governor Raghuram Rajan said inflation is likely to go up from September for a few months as favourable base effects would reverse.
A bulk of RBI’s conditions for further accommodation for a rate cut have been met, so the target of 6 percent inflation is likely to be achieved, he said.
“Since our last review (on August 4), the bulk of our conditions for further accommodation have been met. Therefore, the focus should now shift to bringing inflation to around 5 per cent by the end of fiscal 2016-17,” said the Bi-monthly Policy Statement for 2015-16.