Last Update: February 14, 2023, 11:49 IST
India’s retail inflation rose to 6.52 per cent in January 2023 due to costlier food items and fuel.
Experts say that the RBI MPC is unlikely to stop the repo rate hike now as retail inflation has hit a three-month high in January 2023.
Even as retail inflation hits a three-month high of 6.52 per cent in January 2023 after remaining in the RBI’s comfort zone for two consecutive months, experts said the RBI MPC is unlikely to stop repo rate hikes now. Is. The RBI last week raised the key policy rate by 25 basis points to 6.50 per cent.
“Consumer Price Index (CPI)-based inflation to hit a three-month high of 6.5 per cent in January 2023, faster than expected,” said Aditi Nayar, chief economist and head (research and outreach) at ICRA. Due to an unexpectedly sharp jump in food inflation. Following the jump in the January 2023 CPI inflation print, we have revised down our forecast for Q4 FY2023 to average CPI inflation from 6.0 per cent to 6.2 per cent, which is higher than the projection released by the MPC last week. Granting that there could be another rate hike. Offing in April 2023.”
India’s retail inflation rose to 6.52 per cent in January 2023 due to costlier food items and fuel. In December 2022, the consumer price index (CPI) based inflation came down to 5.72 per cent. In November 2022, it had come down to 5.88 per cent. Retail inflation came in November after remaining under the RBI’s 2-6 per cent band at 5.88 per cent for 10 consecutive months.
Upasana Bhardwaj, Chief Economist, Kotak Mahindra Bank, said, “Inflation for January 2023 has shown a surprising upside. The previous soft reading was due to food prices and this reading has reversed the softening as cereals, milk and other protein rich items remained at higher levels. Besides, core inflation also remains high.”
Bhardwaj said that overall, the reading is expected to discourage the markets as the risk of a more aggressive rate hike increases. “We now assign a high probability of a rate hike of 25 bps in April, with room for a change in stance for the foreseeable future.”
Suman Chowdhary, Chief Analytical Officer, Acute Ratings & Research, said, “In light of the unpredictable inflation trajectory, the likelihood of a further hike in interest rates in the next MPC has certainly increased. It is unlikely that the MPC will opt for a pause in such an environment.” where both headline CPI inflation and core inflation do not fall below 6 per cent.”
He also said that the monetary stance on “return of accommodation” is expected to continue in the near term. This may also lead to hardening of rates in the bond market.
However, Sunil Kumar Sinha, leading economist India Ratings & Research expects a pause in rate hikes. “Ind-Ra believes that softening global commodity prices and normalization of supply chains are expected to reduce the pricing power exercised by the manufacturing sector.”
He said February 2023 headline retail inflation is expected to be around 6.5 per cent, and is expected to moderate from March 2023.
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