ET analysis: Surging corporate profits to help ease Reserve Bank's inflation fight
consumer price gauge hit a half century of stubborn defiance in November. For the 50th month, the reading on the politically sensitive gauge strayed from the 4±2 percentage guideposts, with a surge in food prices causing an ungainly spike.
Its implications for policymaking are not far to seek. They help explain why the central bank in Mumbai and its counterparts in the West have different takes on the threat emanating from inflation.
Equities worldwide have surged in December amid expectations that the price cycle in the US is very much on the mend, increasing the likelihood of an early start to rate easing by the Federal Reserve.
US bond yields have declined more than 70 basis points in three months, translating into a slide in excess of 14%.
The majority of the shrinkage in US borrowing costs is of much more recent vintage: In the past one month, US ten-year bond yields have declined more than 12%, with the latest Fed commentary shortening the odds on an early end to the rate hardening cycle that was the steepest since the 1970s' oil crisis.
By contrast, the minutes of the latest meeting of the Monetary Policy Committee (MPC) are far more circumspect. Members of the key Reserve Bank of India (RBI) panel have indicated that the rate-setting committee will not cease its steadfast and unwavering vigil on price stability.
Seen in the prudential light of the November spike, the MPC stands amply vindicated on prioritising price stability over every other objective.
Profits & Price Stability
But, does the central bank have any major cause for concern beyond farmgate prices? Probably not.
Inflation in manufactured and processed products will unlikely surge, evidenced in the trend in recent corporate performance.
India
