RBI likely to hold repo rate, focus on falling inflation trajectory over the rate of inflation: Economists
RBI) tolerance limit of 2-6% for a second consecutive month. Read here: India's retail inflation eases to 6.83% in August from 15-month high peak in July; remains above RBI's tolerance band In its August monetary policy, while keeping the repo rate unchanged, the Monetary Policy Committee (MPC) of the central bank, headed by RBI Governor Shaktikanta Das had raised CPI inflation forecast for the July-September quarter of FY24 to 6.2% from 5.2%.
Economists expect the inflationary pressures to continue to moderate going ahead and ultimately come under the RBI’s tolerance band in September. Given the spatial distribution of monsoon and its impact on Kharif sowing and subsequently on cereals inflation, as also steep decline in LPG prices offsetting CPI by 25 bps, economists at State Bank of India (SBI) see good case for retail inflation to slouch towards RBI’s tolerance zone.
With this easing CPI inflation, economists expect the RBI’s MPC to hold repo rates again in its October monetary policy. Also Read: Industrial production rises to 5.7% in July from 3.7% in June “Fiscal policy interventions helped in reducing volatility within prices of key food items like cereals, pulses and vegetables.
This enabled the overall retail inflation to inch lower in August. Monetary policy makers should get some room to continue with the pause in rate hikes, in the October meeting, assuming food prices will cool further hereon as better estimates of the Kharif crop harvest start emerging," said Debopam Chaudhuri, Chief Economist at Piramal Group.
Nevertheless, he added, gyrations in food prices will be common during the rest of the year, as El-Nino’s impact on the Rabi crop could raise prices of wheat, sugarcane, and pulses in early 2024. “In
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