What is the inflation projection for FY25 as retained by the RBI in its Monetary Policy Committee (MPC) meeting held in October 2024? 

The correct answer is 0.045.

Key Points

• The Reserve Bank of India (RBI) retained the inflation projection for FY25 at 4.5% during its Monetary Policy Committee (MPC) meeting held in October 2024.
• This projection is based on the RBI's assessment of various macroeconomic indicators, including global commodity prices, domestic supply-demand dynamics, and fiscal policies.
• The decision to retain this projection reflects the RBI's confidence in managing inflation within its target range, despite ongoing global economic uncertainties.
• The RBI aims to ensure that inflation remains within the mandated target of 4% (+/- 2%) to maintain price stability while supporting economic growth.

Additional Information

• Consumer Price Index (CPI)
  • The CPI measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
  • It is a crucial indicator used to assess inflation and make economic decisions.
  • The RBI primarily uses CPI for setting its inflation targets.
• Monetary Policy Committee (MPC)
  • The MPC is responsible for setting the policy interest rate (repo rate) to achieve the inflation target.
  • The committee meets bi-monthly to review the economic and inflation outlook and make policy decisions.
  • It consists of six members, with three nominated by the government and three from the RBI.
• Repo Rate
  • The repo rate is the rate at which the RBI lends money to commercial banks.
  • It is a key tool used by the RBI to control inflation and manage liquidity in the economy.
  • Changes in the repo rate can influence borrowing costs, consumer spending, and overall economic activity.
• Inflation Targeting
  • Inflation targeting is a monetary policy strategy used by central banks to maintain inflation within a specified range.
  • The RBI's inflation target is set at 4% with a tolerance band of +/- 2%.
  • This approach helps anchor inflation expectations and enhances the credibility of the central bank.