India’s headline inflation may ease below 6% by March -analysts

Debashis Dhara, a vegetable vendor, speaks on his cell phone at a retail market space in Kolkata, India, March 22, 2022. Image taken March 22, 2022. REUTERS/Rupak De Chowdhuri

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MUMBAI, Aug 22 (Reuters) – India’s headline retail inflation may ease below 6% by the fourth quarter of this monetary 12 months, bringing an finish to the present cycle of fee hikes, analysts stated over the weekend.

Following the discharge of minutes from the central financial institution’s financial coverage committee on Friday, analysts stated the Reserve Financial institution of India (RBI) may hike repo charges by 50-60 foundation factors by December.

“We anticipate the RBI to ship two 25 bps fee hikes on the September and December conferences, taking the repo fee to five.90%,” Rahul Bajoria, chief India economist at Barclays stated.

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India’s shopper inflation (INCPIY=ECI) dipped to six.71% in July, easing for the third month in a row, however remained above the RBI’s mandated goal band of two%-6% for a seventh straight month.

Regardless of indicators of inflation having peaked in India, the outlook stays extremely unsure, members of the central financial institution’s financial coverage committee stated of their report. learn extra

Bringing retail worth rise nearer to RBI’s goal of 4% was important to maintain financial development over the medium time period, the committee stated.

Some analysts stated a steep 50 foundation factors enhance in repo fee was additionally doable subsequent month.

“The potential of a 50 bps hike in September cannot be dominated out, if the (U.S.) Fed delivers one other 75 bps hike,” Gaura Sen Gupta, India economist at IDFC First Financial institution stated in a notice.

Earlier this month, the RBI raised the financial institution’s key lending fee (INREPO=ECI) by 50 bps to five.40%, its third enhance in 4 months to curb rising worth pressures.

The RBI has hiked repo fee by 140 foundation factors since May.

“In our view, the RBI is successfully being cautious in its coverage method, particularly forward of the winter cycle, when vitality costs could possibly be risky,” Bajoria of Barclays stated.

Crude provides might tighten once more when European consumers begin in search of different provides to exchange Russian oil forward of European Union sanctions that take impact from Dec. 5. learn extra

Nomura retained its expectations of terminal repo fee being at 6.00% with 35 bps and 25 bps hike in September and December respectively.

“Whereas the minutes affirm that extra hikes are coming…the terminal coverage fee shouldn’t be too distant,” analysts Sonal Varma and Aurodeep Nandi stated.

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Reporting by Dharamraj Lalit Dhutia; Modifying by Neha Arora

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