What to expect from next RBI policy meeting as inflation quickens?


Indian Market
by 5paisa Research Team Last Updated: Dec 13, 2022 - 05:29 pm 15.6k Views

The Reserve Bank of India (RBI) could raise benchmark lending rates by another 50 basis points (bps), most analysts feel. 

The central bank’s hand may be forced as India’s retail inflation rate rose to 7.0% in August from 6.71% in the previous month, data released on Monday showed. The August reading was a tad above the 6.9% expected by economists polled by Reuters. Higher food inflation contributed to the increase in headline rate.

What is the RBI’s focus likely to be when its bi-monthly monetary policy committee meets next?

Analysts feel that the relatively resilient growth outlook, coupled with robust credit growth and sticky core inflation, will keep the RBI's focus firmly on managing inflation

By how much did India’s core consumer price index (CPI) rise in August?

According to calculations by Barclays, cited by Reuters, core CPI rose 6.17% in August

What have some of the analysts actually said?

"From a policy perspective, another month of above-target inflation clears the path for further monetary tightening at the next MPC (Monetary Policy Committee) meeting on 30 September," said Rahul Bajoria, chief India economist at Barclays Bank, according to a Reuters report.

"It's clear that inflation remains uncomfortably high and (the August) data will do little to ease the concerns of several MPC members, who continue to strike a relatively hawkish tone," Shilan Shah, senior India economist at Capital Economics, said in a note.

Analysts like Shah feel that the RBI could even switch to 25 basis points hikes in the two meetings that follow the September meet, taking the repo rate to 6.40% in the first quarter of next year.

How important a role has the year’s monsoon played in the RBI’s calculations?

The uneven monsoon rainfall has led to food prices trending higher in the first two weeks of September, IDFC First Bank pointed out. As a result, the preliminary estimate for September CPI inflation is tracking an "uncomfortable" 7.3%, it said. The bank expects inflation to average 6.7% for this fiscal year.

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