RBI expects inflation to be about 5.5 per cent in FY14

The Reserve Bank of India said in its annual monetary policy review on Friday that it expects inflation to be range-bound around 5.5 per cent during the current fiscal year.

"In the Reserve Bank's assessment, WPI inflation is expected to be range-bound around 5.5 per cent during 2013-14. This assessment factors in the domestic demand-supply balance, the outlook for global commodity prices and the forecast of a normal monsoon," the apex bank said.

Headline inflation, as measured by the wholesale price index (WPI), moderated to an average of 7.3 per cent last fiscal year.

The overall inflation in March fell to 5.96 per cent, lowest in the last three years.

The Reserve Bank further said that it is critical to consolidate and build on the recent gains in containing inflation and it will endeavour to condition the evolution of inflation to a level of 5 per cent by March 2014.

RBI governor D Subbarao cut the key interest rate by just 0.25 per cent to 7.25 per cent and kept the liquidity enhancing cash reserve requirement unchanged, disappointing the industry and stock market.

RBI said there would be modest improvement in the country's economic growth to 5.7 per cent in the current fiscal year, as against the decade's low of 5 per cent in 2013-14.