To boost growth while food inflation surges in Asia’s third largest economy, India’s central bank is anticipated to maintain its benchmark rate and policy stance for a third straight meeting.
According to 19 out of 20 economists who expressed their predictions on the position, the RBI is likely to maintain its ‘withdrawal of accommodation’ posture established in April of last year. Only one analyst anticipated the change in terminology.
We anticipate the RBI to ignore the sharp increase in food inflation, take solace in the fact that core inflation is falling, maintain the policy repo rate in calendar 2023, and maintain its hawkish outlook.
etail inflation reached a three-month high of 4.81% in June as a result of rising food costs brought on by lesser monsoon rainfall in some areas of India and floods in other areas.
Additionally, as crude prices rise, the third-largest oil consumer in the world is seeing an increase in the price of imports. By reducing earnings, food and fuel inflation may reduce consumer demand, strengthening the need for the central bank to take precautions against any potential knock-on consequences of price increases. The RBI will likely be forced to increase their 5.1% average inflation prediction for fiscal year 2023–2024 by roughly 30 basis points.
It is predicted that inflation would stabilise at roughly the middle of 4% on a more consistent basis. The central bank governor may provide clues about the rate path in the future, therefore economists are waiting to see if this is still the case.