Chief Analytical Officer, Mr. Suman Chowdhury
50 bps rate hike quite likely in the forthcoming MPC meeting
India's CPI inflation in Aug-22 rose marginally to 7.0% from 6.7% recorded in Jul-22, thereby reversing a three-month downward streak in the price momentum. After peaking out at 7.8% in Apr-22, India's retail inflation continued to ease on a sequential basis with the print consolidating below the 7% mark in Jul-22. However, the rise in food prices amid an erratic monsoon pattern and GST hikes on certain food products of mass consumption has again pushed the CPI print at 7.0% in Aug-22. On a sequential basis, the print inched up slightly by 0.52% from 0.46% MoM with price pressure seen primarily in the food category.
Going forward, Acuité expects the sticky core inflation to persist with a strong pick-up in retail, lagged pass-through of elevated input prices, and impact of GST rate hike on certain household consumption items.
In terms of trajectory, after averaging at 7.3% in Q1FY23, Acuité expects inflation to display some downside in the ongoing quarter, notwithstanding a marginal upward bias that months of Aug-Sep-22 carry owing to an adverse base.
Says Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research "While concerns over inflation appear to have eased marginally on the domestic front, it continues to remain an evolving concern globally with leading major central banks continuing with their monetary tightening journey. In the domestic context, we also expect the RBI to remain hawkish till the CPI headline print sustainably drops below the 6.0% MPC - the upper tolerance threshold. Accordingly, there is an increased likelihood of another 50 bps rate hike in the Sep-22 policy review itself or spread between the former and Dec-22 meeting to combat the residual inflationary expectations and arrest further rupee depreciation."
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