Given the January CPI inflation data and the release of the minutes of the monetary policy committee meeting on Wednesday, Kotak Institutional Equities expects the Reserve Bank of India to raise the repo rate by another 25 basis points in the April policy.
“Prior to the January 2023 inflation print, we were fully convinced about a prolonged pause by the RBI MPC with the repo rate at 6.5 per cent. However, the surge in the January inflation print to 6.52 per cent (stemming largely from the surprise jump in cereals inflation) has raised the risk of higher terminal repo rate,” the firm said in a note.
The expectation is owing to persistently elevated core inflation, volatile food prices, increasing likelihood of a higher terminal rate in the US, and uncertainty in commodity prices amid ongoing geopolitical conflicts and scale of revival in China.
Q4FY23 average CPI inflation is estimated to be 6 per cent compared to RBI’s estimate of 5.6 per cent, leaving the inflation average above 6 per cent for the fifth consecutive quarter, the note said.
The February MPC minutes highlighted internal members’ elevated concerns on core inflation while a few members were concerned about overtightening. Most members, however, expressed comfort on the growth front.
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.