CPI inflation in the country increased to 5.08 per cent in June this year.

The Reserve Bank of India (RBI) is likely to continue its approach of withdrawing accommodation, which aims at addressing inflationary pressures while ensuring a growth trajectory, the report noted.

The central bank, however, faces challenges in policy transmission, as deposit rates have shown downward rigidity despite a declining weighted average lending rate (WALR), a situation that complicates the RBI's efforts to implement effective monetary policy.

"With monsoon progressing satisfactorily with 2-per cent surplus till date and progress of area coverage under Kharif crops showing 2.9 per cent YoY [year on year], we expect inflation to remain within RBI target in FY25," the report said.

Though banks are chasing deposits to fund the incremental credit growth, a recent RBI report suggests the WALR on fresh rupee loan decreased by 11 basis points from 9.43 in January this year to 9.32 in June, the SBI report noted.

RBI decisions in future will be influenced by both domestic and global economic conditions and the potential for a recession in the United States and geopolitical tensions may affect inflation dynamics in India, it added.

Fibre2Fashion News Desk (DS)