The Reserve Bank of India (RBI) has retained the inflation forecast at 6.7% for FY23 while expressing caution about the headwinds despite the recent correction in crude prices.

The RBI’s Monetary Policy Committee (MPC) sees the fiscal second quarter inflation at 7.1%. This is expected to ease to 6.5% in Q3 and to 5.8% in Q4.

India's retail inflation is projected to further reduce to 5% in the first quarter of the next financial year (2023-24).

The RBI Governor Shaktikanta Das said the global geopolitical developments are weighing heavily on the domestic inflation trajectory.

The consumer-price based inflation (CPI), or retail inflation, stood at 7% in August, up from 6.7% in July.

“The inflation level is high at present with August number at 7%. And there is an expectation that the September number could be little higher than 7%. But that has already been factored into our calculation and we have said that, this year, we will still be at 6.7%,” Das said.

The RBI’s target is to maintain inflation at 4%, with a flexibility of up to 2% on either side.