RBI's rate cut chances likely delayed as veggie prices burn a hole in pockets

economictimes.indiatimes.com:

India’s policymakers are unlikely to tweak interest rates immediately to ease the plight of citizens who are paying in hundreds for even staple vegetables and pulses. India’s policymakers are unlikely to tweak interest rates immediately to ease the plight of citizens whose food bills have soared due to a spike in vegetable and pulses’ prices. The rate-setting members may just be forced to revise their inflation forecasts, economists told ET Online.

The recent spike in the prices of essential food items, which have doubled in most cases across India, has been attributed to geographical anomalies like heatwave and pestilence. Most prominently, prices of essentials such as tomatoes, ginger, bottle gourd, and green chillies have seen a painful rise. Economists opined that the rise in prices is transitory in nature and is unlikely to alter the Monetary Policy Committee’s rate plans imminently.

However, the RBI is likely to turn more cautious. “The summer months usually see volatility in vegetables prices and this is unlikely to alter the RBI’s policy plans for now. That said, an increase in volatility in food prices which pushes up the inflation path for H2FY24 could push rate cut expectations forward,” said Rajani Sinha, Chief Economist at CareEdge.