New Delhi: The Reserve Bank is far ahead in controlling inflation, which appears to be peaking though it may go for a hike in interest rates in August and October, said a research report by SBI on Monday.
After hitting a 95-month (almost 8 years) high of 7.79 percent in April, consumer price Index (CPI) based inflation eased to 7.04 per cent in May.
According to SBI’s research report ‘Ecowrap’, the core CPI also declined to 6.09 per cent in May from 6.97 per cent in April.
“In the recent past, there have been comments that have questioned whether the RBI has been behind the curve in controlling inflation.
“We believe the RBI is far ahead of the curve in controlling inflation and that the Fed can borrow a template from the RBI to control US inflation that is widespread and threatens to break global financial stability,” it said. Told.
This report has been written by Soumya Kanti Ghosh, Group Chief Economic Advisor, State Bank of India.
The report further said that there are expectations that the RBI may factor in the rate hike in August (inflation likely to come in above 7 per cent in June) and even in the October policy, and it may be considered in October. may exceed pre-pandemic levels. up to 5.5 percent.
“Our peak rate at the end of the cycle now has a high probability of a lower range of 5.5 per cent and a low probability of going to 5.75 per cent depending on the inflation trajectory,” the report said.
However, it said it is completely data-dependent and is subject to revision.
The RBI increased the short-term lending rate by 40 basis points in May and 50 basis points in June, taking the repo rate to 4.9 per cent, to contain inflation.
“Our average inflation forecast for 2022-23 is 6.7 per cent, but our quarterly inflation numbers are slightly different from those of the RBI.
“The best thing is that the summit inflation may With a little luck, has reached 7.8 per cent,” it added.
Earlier this month, RBI revised it upwards inflation forecast 6.7 percent from its previous forecast of 5.7 percent for the current fiscal.
The central bank expects inflation to be 7.5 percent in the first quarter; 7.4 percent in the second quarter; third quarter at 6.2 percent; And fourth quarter at 5.8 percent, with risks evenly balanced.
After hitting a 95-month (almost 8 years) high of 7.79 percent in April, consumer price Index (CPI) based inflation eased to 7.04 per cent in May.
According to SBI’s research report ‘Ecowrap’, the core CPI also declined to 6.09 per cent in May from 6.97 per cent in April.
“In the recent past, there have been comments that have questioned whether the RBI has been behind the curve in controlling inflation.
“We believe the RBI is far ahead of the curve in controlling inflation and that the Fed can borrow a template from the RBI to control US inflation that is widespread and threatens to break global financial stability,” it said. Told.
This report has been written by Soumya Kanti Ghosh, Group Chief Economic Advisor, State Bank of India.
The report further said that there are expectations that the RBI may factor in the rate hike in August (inflation likely to come in above 7 per cent in June) and even in the October policy, and it may be considered in October. may exceed pre-pandemic levels. up to 5.5 percent.
“Our peak rate at the end of the cycle now has a high probability of a lower range of 5.5 per cent and a low probability of going to 5.75 per cent depending on the inflation trajectory,” the report said.
However, it said it is completely data-dependent and is subject to revision.
The RBI increased the short-term lending rate by 40 basis points in May and 50 basis points in June, taking the repo rate to 4.9 per cent, to contain inflation.
“Our average inflation forecast for 2022-23 is 6.7 per cent, but our quarterly inflation numbers are slightly different from those of the RBI.
“The best thing is that the summit inflation may With a little luck, has reached 7.8 per cent,” it added.
Earlier this month, RBI revised it upwards inflation forecast 6.7 percent from its previous forecast of 5.7 percent for the current fiscal.
The central bank expects inflation to be 7.5 percent in the first quarter; 7.4 percent in the second quarter; third quarter at 6.2 percent; And fourth quarter at 5.8 percent, with risks evenly balanced.