Thursday, September 29, 2022

Inflation expected to drop below 6% by March

By the end of this fiscal, India’s headline retail inflation is predicted to decline below 6%, ending the current cycle of rate increases, analysts predicted.
Analysts expect the RBI to increase repo rate by 50–60 basis points by December taking it to 5.9 per cent.
“We expect the RBI to deliver two 25 bps rate hikes at the September and December meetings, taking the repo rate to 5.90%,” said Rahul Bajoria, chief India economist at Barclays. The RBI has so far increased repo rate by a total of 140 basis points since May.
In the recently released minutes, the MPC members pointed out that the inflation though coming down due to moderation in food prices still faces risks from volatile external conditions, Business Standard reported.
Some analysts predicted that a steep 50 basis points increase in repo rate was also possible next month.
“The possibility of a 50 bps hike in September can’t be ruled out, if the (U.S.) Fed delivers another 75 bps hike,” Gaura Sen Gupta, India economist at IDFC First Bank said in a note.
“In our view, the RBI is effectively being cautious in its policy approach, especially ahead of the winter cycle, when energy prices could be volatile,” Bajoria of Barclays said.
Crude supplies could tighten again when European buyers start seeking alternative supplies to replace Russian oil ahead of European Union sanctions that take effect from Dec. 5.
Nomura retained its expectations of terminal repo rate being at 6.00% with 35 bps and 25 bps hike in September and December respectively.
“While the minutes confirm that more hikes are coming, the terminal policy rate is not too far away,” analysts Sonal Varma and Aurodeep Nandi said.

SourceAGENCIES