Mumbai: The adverse effects of the unprecedented high global food prices due to the ongoing geopolitical situation is reflecting in the domestic market as well, and going forward inflationary pressures are likely to continue, RBI Governor Shaktikanta Das said on Wednesday.In an off-cycle Monetary Policy Committee (MPC) meeting during May 2-4, the Reserve Bank on Wednesday announced a hike in the key repo rate — at which it lends short term money to banks — by 0.40 per cent to 4.40 per cent with immediate effect.However, the central bank has not tinkered with its inflation projection announced in April this year. Das said that the action of the Reserve Bank of India (RBI) should be seen as “growth positive” aimed at containing inflation and supporting growth. The retail inflation that has remained stubbornly above the RBI’s upper tolerance level of 6 per cent for the last three months and the ongoing war between Russia-Ukraine has pushed the inflation in almost commodities across the globe. RBI projected the retail inflation to be at 5.7 per cent in the current fiscal year.“Confronted by elevated inflationary pressures that have shifted the future trajectory of inflation upwards, we have announced our intention to engage in withdrawal of accommodation to ensure that inflation remains aligned to the target,” Das said. Consumer Price Index (CPI)-based retail inflation rose to nearly 7 per cent in March mainly due to the impact of adverse spillovers from unprecedented high global food prices, RBI said.Nine out of the twelve food sub-groups registered an increase in inflation in March.“High frequency price indicators for April indicate the persistence of food price pressures. Simultaneously, the direct impact of the increases in domestic pump prices of petroleum products – beginning the second fortnight of March – is feeding into core inflation prints and is expected to have intensified in April,” Das said while reading out his statement.Looking ahead, food inflation pressures are likely to continue, he said.“Spillovers from global wheat shortages are impacting domestic prices, even though domestic supply remains comfortable. Prices of edible oils may firm up further due to export restrictions by key producing countries and the loss of sunflower oil output due to the war. Elevated feed costs are translating into escalation in poultry, milk and dairy product prices,” he said.Besides, the international crude oil prices continue to hover above USD 100 per barrel and this is prompting passthrough to domestic pump prices.The risks of unprecedented input cost pressures translating into yet another round of price increases for processed food, non-food manufactured products and services are now more potent than before, the governor said further.“This could strengthen corporate pricing power if margins get squeezed inordinately. To sum up, the strengthening of inflationary impulses in sync with the persistence of adverse global price shocks poses upward risks to the inflation trajectory presented in the April MPC resolution,” Das said.He said that sustained high inflation inevitably hurts savings, investment, competitiveness and output growth. It has pronounced adverse effects on the poorer segments of the population by eroding their purchasing power.“I would, therefore, like to emphasise that our monetary policy actions today – aimed at lowering inflation and anchoring inflation expectations – will strengthen and consolidate the medium-term growth prospects of the economy,” he said.Reiterating that the RBI remains steadfast in its commitment to contain inflation and support growth, Das said inflation must be tamed in order to keep the Indian economy resolute on its course to sustained and inclusive growth.“The biggest contribution to overall macroeconomic and financial stability as well as sustainable growth would come from our effort to maintain price stability,” he added.—PTI

The adverse effects of the unprecedented high global food prices due to the ongoing geopolitical situation is reflecting in the domestic market as well, and going forward inflationary pressures are likely to continue, RBI Governor Shaktikanta Das said on Wednesday.

Inflationary Pressures Likely To Continue Going Forward On Geopolitical Tensions: RBI

 The adverse effects of the unprecedented high global food prices due to the ongoing geopolitical situation is reflecting in the domestic market as well, and going forward inflationary pressures are likely to continue, RBI Governor Shaktikanta Das said on Wednesday.



Mumbai: The inflation prints in the near term is expected to remain higher around 7 per cent, with a gradual move likely towards MPCs upper threshold of 6 per cent by end-FY2023.
"We expect inflation to remain elevated with a return to the sub-6 per cent level not likely before February 2023. We maintain our FY2023E average CPI inflation estimate at 6.5 per cent. We also maintain our call for additional 35-60 bps of repo rate hikes to 5.75-6 per cent by end-CY2022," Kotak Economic Research report said.
The report also said that some early signs relief in inflation are visible in the near term due to easing commodity and crude oil prices, normal monsoons and improving reservoir levels, and easing global supply-chain pressures.
Kotak Research expect the CPI inflation trajectory to be lower than the Reserve Bank of India's (RBI) estimates by 70 basis points in first half of calendar year 2023, and maintain our FY2023E CPI inflation estimate at 6.5 per cent.
To tame inflation and stabilise rupee, the central bank is likely to hike repo rate in the near term. However, the pace of rate hike will be lower due to global disinflationary pressures and pass-through impact of monetary tightening to demand side pressures.
"Accordingly, we maintain our call for further 35-60 basis points of repo rate hikes to 5.75-6 per cent by end-CY2022," the report added.
In July, CPI inflation has moderated to 6.71 per cent, as against 7.01 per cent in June due to moderation in food inflation. The moderation in food prices was led by decline in prices of meat and fish, and oils and fats.
Whereas, June IIP growth moderated to 12.3 per cent, while growing sequentially by 0.1 per cent. On a sectoral basis, electricity production grew by 16.4 per cent, manufacturing by 12.5 per cent, and mining by 7.5 per cent.
Meanwhile, July core inflation (CPI excluding food, fuel, pan and tobacco) remained broadly sticky at 6.25 per cent, with a sequential pickup of 0.7 per cent. This was led mainly by rising costs of education, and clothing and footwear.&nbsp;
—IANS

The inflation prints in the near term is expected to remain higher around 7 per cent, with a gradual move likely towards MPCs upper threshold of 6 per cent by end-FY2023.

Inflation to remain elevated with a return to sub-6% not likely before Feb 2023: Kotak report

Mumbai (The Hawk): The repo rate increased to 6.25 percent on Wednesday as a result of a 35-basis-point hike, according to the Reserve Bank of India. According to governor Shaktikanta Das, the RBI Monetary Policy Committee (MPC) decided to increase the rate in order to bring high inflation back to its target of 4%.
The six-member MPC continued to prioritise withdrawing accommodation during its December 5–7 policy meeting.
Although 5 out of the MPC's 6 members voted in favour of the rate increase, it was not a unanimous decision. Four out of the six members who voted did not agree on the stance, and the decision was not made unanimously.
The floor of the interest rate corridor, the Standing Deposit Facility rate, is now 35 basis points higher at 6%. The upper band of the interest rate corridor, known as the Marginal Standing Facility rate, has also been raised by 35 basis points to 6.50 percent.
The rate increase matched market forecasts. A survey conducted by the Business Standard with 10 respondents forecast a rate increase of 35 basis points. The repo rate has risen to its highest level since February 2019 at this time. The MPC has increased the repo rate by 225 basis points so far in 2022.
The 10-year benchmark bond's yield last stood at 7.29%, up four basis points from the previous close. The movement of bond prices and yields is opposite. Traders claimed that Das' frequent expressions of worry over sustained and sticky core inflation were the cause of the first weakening in bonds.
The rupee's last value against the US dollar was 82.62, unchanged from the previous closing.
According to Das, the MPC kept its 6.7% inflation prediction for the current fiscal year. However, the MPC has slightly increased its projections for both the current quarter and the following quarter. Inflation as measured by the CPI is predicted to be 6.6% from October to December, up from the previously predicted 6.5%. Headline retail inflation is anticipated to be 5.9% in January through March, down from the earlier forecast of 5.8%.
According to Das, the MPC has kept its inflation projection for the first quarter of the upcoming fiscal year at 5%, while the price gauge is expected to be at 5.4% in the second quarter.
Das highlighted ongoing price pressures and the stickiness of core inflation, which excludes the volatile components of food and fuel, while stating that CPI-based inflation is anticipated to reduce moving forward.
"There are greater uncertainty surrounding the medium-term inflation objective...
To keep inflation expectations anchored, break the core inflation persistence, and contain second-round impacts, more calibrated monetary policy action is necessary, according to Das.
Das repeatedly emphasised the need to lower excessive core inflation and referred to it as the current "primary risk." Even though future food inflation is predicted to moderate, he noted pressure points, such as rising cereal, milk, and spice prices.
He noted that "overall CPI price momentum remained high."
Due to supply-side interruptions brought on by the Covid-19 epidemic and a spike in global commodity prices following Russia's invasion of Ukraine in late February, consumer price index-based inflation has been significant for a number of months.
For ten consecutive months, CPI inflation has exceeded the upper limit of the MPC's tolerance range of 2–6%. The price measure has been above 4% for 37 straight months and was 6.77 percent in October. Core inflation was roughly 6%.
Growth forecast cut
The prediction for GDP growth for the current fiscal year was also slightly lowered by the RBI governor, going from 7% to 6.8%. Despite the revised growth prediction, he claimed that India would still be among the big economies with the fastest growth rates.
According to Das, the GDP growth for October through December is now projected to be 4.4%, down from 4.6%, while growth for January through March is projected to be 4.2%, down from 4.6%.
GDP growth is anticipated to be 7.1% in the first quarter of the upcoming fiscal year as opposed to the 7.2% that the MPC had previously predicted. 5.9% GDP growth is anticipated in the second quarter of the upcoming fiscal year.
High-frequency indicators in the most recent quarter, according to Das, revealed a strengthening of economic activity. He noted a resurgence in rural demand, strength in consumer discretionary spending, and good sales of tractors and two-wheelers as indicators.
(Inputs from Agencies)

The repo rate increased to 6.25 percent on Wednesday as a result of a 35-basis-point hike, according to the Reserve Bank of India. According to governor Shaktikanta Das, the RBI Monetary Policy Committee (MPC) decided to increase the rate in order to bring high inflation back to its target of 4%.

RBI increases the repo rate by 35 bps

Chennai: The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) may not change the interest rates and would continue with the 'pause' mode at their upcoming meeting, said experts.
The MPC met on April 3, 5 and 6 this year and decided to pause on the repo rate at 6.50 per cent after hiking continuously earlier as an inflation control measure.
"The upcoming MPC meeting in early June is expected to focus on two important aspects that have emerged in the last few weeks -- a sustained moderation of the headline retail inflation and a better than expected GDP growth print in Q4FY23," Suman Chowdhury, Chief Economist and Head - Research, Acuite Ratings and Research told IANS.
According to Chowdhury, the consumer price index (CPI) inflation moderated in April-23 to 4.70 per cent year-on-year (YoY), an 18-month low and remained within the RBI's target range (2-6 per cent) for the second consecutive month.
"The wholesale price index (WPI) inflation moderated to a 34-month low of minus/(-)0.92 per cent YoY in Apr-23, retreating to negative territory after a gap of 33-months," Chowdhury added. Core retail and wholesale inflation also moderated to an 11-month low of 5.48 per cent YoY and 41-month low of minus/(-)1.77 per cent YoY in Apr-23 respectively.
Chowdhury said the benign trajectory for both WPI and CPI can be attributed to easing food inflation, lower commodity costs, favourable statistical base effects and lagged impact of past monetary tightening.
"Potential risks such as the El Nino notwithstanding, we expect a continuing moderation in headline CPI inflation in FY24 although core inflation can prove somewhat sticky amidst the strong growth momentum in services, especially contact intensive ones. We maintain our FY24 CPI inflation projection at 5.3 per cent as compared to 6.6 per cent in the previous year," Chowdhury said.
As regards the GDP numbers, Chowdhury said the provisional estimates for GDP in Q4FY23 and FY23 as a whole, has surpassed the consensus figures in the market.
"As against our estimate of Q4GDP of 5.0 per cent, the actual print has come at 6.1 per cent YoY and significantly higher than the 4.4 per cent YoY in Q3FY23. Overall, the GDP growth for FY23 stands at 7.2 per cent as compared to the 7.0 per cent reported in the advance estimates earlier," Chowdhury said.
However, the concern remains on the demand side as private consumption has grown by 2.8 per cent YoY only in the fourth quarter, Chowdhury remarked.
For the current year, Acuite Ratings continue to forecast a growth of 6.0 per cent given the expected impact of the global uncertainties and the lagged impact of the interest rate hikes in the domestic economy although RBI has pegged it at a more optimistic 6.5 per cent, Chowdhury said.
"Given such a scenario on the growth-inflation dynamics, we believe RBI MPC will prefer to adopt a "wait and watch" mode before taking any confident action on any rate changes. The "pause" mode is likely to, therefore, continue for another two quarters," Chowdhury concluded.
On his part, Churchil Bhatt, Executive Vice President &amp; Debt Fund Manager, Kotak Mahindra Life Insurance Company Limited said the market is not anticipating an immediate rate cut.
"The best case for the June policy would be a softer 'stance' by the MPC. The current policy stance of 'withdrawal of accommodation' has already run its course, with pandemic-era policy accommodation behind us. It's only a matter of time before the MPC moves to a 'neutral' stance," Bhatt said. According to Bhatt, in June, MPC is likely to maintain a status quo on rates.
At the April meeting, the MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.
Arguing for a pause Ashima Goyal, Emeritus Professor, Indira Gandhi Institute of Development Research, Mumbai said as the inflation forecast for FY24 is 5.2 per cent with Q4 at 5.2 per cent, a repo rate at 6.5 per cent implies the real policy rate is greater than one.
"It has already tightened enough to progressively bring inflation towards the target of 4 per cent, with other complementary policies and barring major new shocks. A further rise in real interest rates is best avoided at present since high real rates can trigger a non-linear switch to a low growth path," Goyal said.
Goyal and Prof. Jayanth R. Varma, Professor, Indian Institute of Management, Ahmedabad were against hiking repo rate at the recent MPC meetings.
Varma said he does not understand the meaning of the term 'stance' - withdrawal of accommodation.
"Turning to the stance, I must confess that I fail to comprehend its meaning. My colleagues in the MPC assure me that the language is crystal clear to market participants and others. It may well be that I am the only person who finds it hard to understand," Varma said.
"But I am unable to reconcile the language of the stance with the simple fact that no further 'withdrawal of accommodation' remains to be done since the repo rate has already been raised to the 6.50 per cent level prevailing at the beginning of the previous easing cycle in February 2019. It is of course possible to undertake further tightening, but that would not constitute a 'withdrawal of accommodation' by any stretch of the imagination," Varma added.—IANS

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) may not change the interest rates

RBI-MPC May Not Change The Interest Rate: Experts

Mumbai: The Reserve Bank of India on Friday decided to keep the policy rate unchanged at 6.5 per cent for the fifth time in a row as it maintains a tight vigil on inflation.  The rate increase cycle was paused in April after six consecutive rate hikes, aggregating to 250 basis points since May 2022.  Announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) unanimously decided to keep the repo rate unchanged at 6.5 per cent.  He said the MPC will remain "actively disinflationary".  According to him, the growth projection has been raised to 7 per cent for the current financial year from 6.5 per cent earlier.  The central bank projected the Consumer Price-based Inflation (CPI) based retail inflation at 5.4 per cent for the current fiscal.  The MPC meeting took place against the backdrop of inflation declining to 4.87 per cent in October. The November print of inflation is expected to be released next week.  The government has mandated the RBI to keep CPI inflation at 4 per cent with a margin of 2 per cent on either side.
—PTI

The Reserve Bank of India on Friday decided to keep the policy rate unchanged at 6.5 per cent for the fifth time in a row

RBI retains repo rate at 6.5 pc for fifth time in a row

Mumbai (Maharashtra) [India]: The Reserve Bank of India (RBI), while maintaining the status quo in the repo rate, pegged India's GDP growth for the next financial year 2024-25 (April-March) at 7 per cent. Quarter-wise, 7.2 per cent growth is seen in Q1, 6.8 in Q2, 7.0 in Q3, and 6.9 in Q4, respectively. RBI said that risks are evenly balanced.
India's real GDP growth for the current financial year ending in March 2024 is also pegged at 7 per cent, 30 basis points lower than the National Statistics Office's first estimates. The RBI pegged India's retail inflation projections for 2024-25 at 4.5 per cent, with Q1 at 5.0 per cent, Q2 at 4.0 per cent, Q3 at 4.6 per cent, and Q4 at 4.7 per cent, with risks evenly balanced. Meanwhile, the Monetary Policy Committee of the RBI, in its February review meeting, unanimously decided to keep the policy repo rate unchanged at 6.5 per cent, thus maintaining status quo for the sixth straight time. The repo rate is the rate of interest at which the RBI lends to other banks. Deliberating the policy statement on Friday morning after a three-day review meeting, RBI Governor Shaktikanta Das attributed comfortable inflation and firm growth dynamics as the reasons behind maintaining the status quo the policy stance.
Das said inflation is moving closer to the target and growth is holding better than expected. Retail inflation in India though, is in RBI's 2-6 per cent comfort level but is above the ideal 4 per cent scenario. In December, it was 5.69 per cent Das said the MPC also decided by a majority of 5 out of 6 members to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth. The Indian economy grew 7.6 per cent during the July-September quarter of the current financial year 2023-24, remaining the fastest-growing major economy. India's GDP growth for the April-June quarter grew 7.8 per cent. The three-day bi-monthly monetary policy committee (MPC) meeting of the RBI began on Tuesday. The RBI typically conducts six bimonthly meetings in a financial year, where it deliberates interest rates, money supply, inflation outlook, and various macroeconomic indicators.  A considerable decline in inflation and its potential for further decline may have prompted the central bank to put the brake on the key interest rate again. Inflation has been a concern for many countries, including advanced economies, but India has largely managed to steer its inflation trajectory quite well. Barring the latest pauses, the RBI has raised the repo rate by 250 basis points cumulatively to 6.5 per cent since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
—ANI

RBI keeps repo rate unchanged, projects 7% GDP growth for 2024-25. Inflation outlook, MPC decisions, and economic growth dynamics explained.

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Inflationary Pressures Likely To Continue Going Forward On Geopolitical Tensions: RBI

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Inflationary Pressures Likely To Continue Going Forward On Geopolitical Tensions: RBI

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