RBI may keep rates unchanged next week, cut likely in December: Mint Poll

livemint.com:

four members voted for a status quo, while two members–Ashima Goyal and Jayanth R Varma–voted for reducing the repo rate by 25 basis points and changing the stance from withdrawal of accommodation to neutral. “I think that the RBI will be very critically targeting the 4% levels for CPI inflation," said Indranil Pan, chief economist, Yes Bank.

“Thus, there is no need to follow the Fed. Especially also as the RBI numbers indicate that inflation will be lower in Q2 and be in the handle of 4% or even lower.

But, Q3 and Q4 are expected to see increases in inflation levels in India." “The concern on food inflation may also sustain as a) spatial distribution of rainfall is not good, b) vegetables have been on the higher side in June and July 2024, c) rice sowing is below last year’s level d) mom growth in protein rich food items have been high," he added. Since the last meeting, food price pressures halted the disinflationary trend in the headline rate in June.

Consumer price index-based inflation spiked to 5.1%, higher than the May headline of 4.8%, owing to the sharp rise in perishable food prices following the heatwave and the slow start to monsoon. While the number is likely to reverse from July owing to base effect, economists expect retail inflation to miss RBI's inflation target for second quarter at 3.8%.

That said, the central bank will keep the FY25 inflation target unchanged at 4.5%, according to economists. "As far as CPI inflation is concerned, we think there could be some upside risks to RBI’s forecast of 4.5% average for FY25, particularly after the July telecom tariff hike, but it is not clear to us whether the RBI will revise its CPI forecast higher at this stage," said Kaushik Das, chief India economist,