The Reserve Bank of India (RBI) has retained the retail inflation projection for the current fiscal at 5.4% but said inflation may see an uptick in November and December due to pressure on food prices.

"Going ahead, the inflation outlook would be considerably influenced by uncertain food prices. High-frequency food price indicators point to an increase in prices of key vegetables, which may push CPI inflation higher in the near term," RBI Governor Shaktikanta Das said today while announcing the RBI’s bi-monthly monetary policy.

Retail or consumer price index-based CPI inflation moderated to 4.9% in October from 7.4% in July.

The ongoing rabi sowing progress for key crops like wheat, spices and pulses needs to be closely monitored, Das said, adding elevated global sugar prices is also a matter of concern.

The RBI, in its bi-monthly policy statement, on Friday retained benchmark interest rates at 6.5% for the fifth time in a row. The repo rate was last hiked in February.

"Monetary policy must continue to be actively disinflationary to ensure fuller transmission and anchoring of inflation expectations," the monetary policy statement said.

The moderation in October inflation was observed in all components of CPI.

There has been broad-based easing in core inflation, indicative of successful disinflation through monetary policy actions, the statement added.

On the positive side, global commodity prices, particularly, agricultural commodity prices, have softened, except rice.

For highly import-dependent food items like edible oils, international prices continue to remain soft. Domestic milk prices are stabilising.

Pro-active supply side interventions by the government are also containing domestic food price pressures, the RBI said, adding crude oil has softened considerably, though it may remain volatile.

"Taking into account these factors and on the assumption of normal monsoons, CPI inflation is projected at 5.4% for 2023-24, with Q3 at 5.6% and Q4 at 5.2%," the statement said.

CPI inflation for the June quarter of 2024-25 is projected at 5.2%, September quarter at 4% and December quarter at 4.7%.