RBI may pause rate hikes in February: Economists

RBI may pause rate hikes in February, The Reserve Bank of India (RBI) will likely pause its rate hike cycle as early as the next monetary policy decision in February this year, with retail inflation sliding below 6% for the second straight month.

In an interview with Bloomberg Television, Ankita Pathak, product manager and economist at DSP Mutual Fund, said, “With India’s headline inflation for the October-December period falling below the RBI’s estimate, the central bank could re-evaluate its strategy amid an ongoing global growth slowdown.”

ICRA Chief Economist Aditi Nayar is also a step further in the dovish direction and expects the rate-setting panel to pause on rates in February.  Join Our Instagram Channel

“While the average CPI inflation in Q3 FY2023 (6.1%) has come in significantly below the MPC’s projection of 6.6%, we foresee a flattish print in Q4 FY2023, before a considerable correction sets in during Q1 FY2024,” the ICRA chief economist said.

“Taking into account today’s lower-than-expected CPI inflation print, and the muted average IIP growth of 1.3% during October-November 2022, we anticipate that the MPC may choose to pause in February 2023,” Nayar added.


Retail inflation eases to 1-year low in Dec

Retail inflation cooled to a one-year low of 5.72% in December, remaining below the central bank’s upper tolerance limit of 6%. A Mint poll of 20 economists had predicted inflation at 5.9%. Join Our Telegram Channel

The overall decline in inflation has raised expectations that the RBI may pause its monetary policy tightening, but economists noted that core inflation, which excludes food and fuel, stayed high at 6.1% in December. Besides, retail inflation is expected to rise this month as the favourable base effect wanes.

The RBI has raised repo rate by 225 basis points since May 2022 to 6.25% as it continues its fight against inflation. In contrast, the US Federal Reserve has raised interest rates by 425 bps to 4.25%-4.50%.




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