The 4% medium-term inflation target is sacrosanct and has not been put in abeyance, Reserve Bank of India Governor Sanjay Malhotra said Friday.

Ruling out suggestions that the RBI may be prioritising growth over inflation and shifting focus to the wider 2-6% tolerance band, Malhotra said any future monetary policy action would depend on whether price rise becomes broad-based and persistent.

The central bank on Friday raised the headline inflation for FY27 by 0.5% to 5.1% amid the US-Iran war, spurt in oil prices and supply disruptions. 

"The target is not in abeyance at all. It's a target which the government has given to us. It remains 4% and that is what our endeavour is," Malhotra said at the post-monetary policy press conference.

Malhotra did not signal any imminent tightening of interest rates but acknowledged that inflation conditions had turned more adverse than earlier.

Replying to a query on the upping of inflation estimate and whether it should be deduced as a rate hike is imminent at the next review, Malhotra said, "Whether it strengthens the case or not, I don't know, but obviously it's more adverse than it was previously".

On Friday, the central bank kept the repo rate unchanged at 5.25% and decided to continue with a 'neutral' stance.

Malhotra said the central bank would closely watch whether inflationary pressures remain temporary or become generalised and persistent.

"If it is a one-time increase, then you look through. But if it is getting generalised, it is getting persistent, it is getting into expectations, then it is the time to act," he pointed out.

The RBI, he reiterated, would remain data-dependent and closely monitor whether supply-led inflation shocks fade or become entrenched.

The central bank projected CPI inflation for Q1 FY27 at 4.2%, Q2 at 5.1%, Q3 at 5.9% and Q4 at 5.4%. Core inflation is projected at 4.7% for FY27.

"These forecasts are subject to upside risks due to global supply chain disruptions, global commodity price shocks, uncertainty about the spatial and temporal distribution of the south-west monsoon and El Nino conditions," Malhotra said.

Longevity of supply chain pressures triggered by the West Asia war and their impact on the prices is the foremost focus area for the RBI at the current juncture, the governor said, adding that the monsoon-related challenges come next.

The central bank revised its oil price estimate to USD 95 per barrel for FY27 from the earlier USD 85 per barrel. Malhotra said this is one of the prime reasons for the revision upwards of CPI-based inflation for the year.