Are the RBI rate hikes really helping cool inflation?


Indian Market
by 5paisa Research Team Last Updated: 2022-09-07T09:30:15+05:30

The Reserve Bank of India (RBI) may have been raising interest rates for some months now, but that seems to be doing little to help tame India’s inflation. 

A Deutsche Bank report has said the country’s inflation rate in August likely rose to 6.9% year-on-year in August, while core inflation likely stood at 6%.

When is the Indian government likely to report the official numbers?

India is set to report the official numbers on the coming Monday. 

What did the report have to say about crude oil prices?

While Brent crude oil prices have recorded a steep decline in recent weeks, the favourable impact will be less reflected in the Consumer Price Inflation as fuel items account for a very small weight, Deutsche Bank said.

Okay, and what about food inflation?

Meanwhile, the risks to food inflation persist with negative seasonality kicking in for the September-November period, the bank said.

The report said that seasonality aside, sowing of pulses has also fallen by 5% year-on-year.

So, is the RBI likely to continue with its rate hikes?

Yes, according to the Deutsche Bank report, it is, and could up the rate by another 75 basis points (bps) to 85 bps through the year.

"Though we would expect the central bank to hike rates in smaller clips from the September meeting, given the significant front-loading (around 200 bps - 205 bps of tightening has already happened) that has already been delivered to protect against future growth headwinds," the report said. 

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