INSUBCONTINENT EXCLUSIVE:
RBI, Reserve Bank of India(Photo: PTI)3 min read Last Updated : Oct 15 2024 | 11:55 AM IST
A sharp jump in India's retail inflation for
September has prompted several economists to push back domestic rate cut bets to the first-half of 2025 from early December, with some
citing growth as a bigger factor that could determine the timing of an interest rate reduction.
Annual retail inflation clocked in at 5.49
per cent in September, its highest level in nine months, due to rising food prices
It rose sharply from 3.65 per cent in August and was above economists' forecast of 5.04 per cent.Click here to connect with us on
WhatsApp
"September CPI print has reaffirmed our view that despite a stance change, near-term inflation risks do not favour a December
delay to Apr-2025 as inflation could still be averaging 4.5 per cent by the time of Feb-2025 MPC (Monetary Policy Committee) meet," they
added.
The Reserve Bank of India (RBI) held rates steady at 6.5 per cent for a tenth straight meeting last week but eased its stance to
'neutral' from 'withdrawal of accommodation', raising expectations of a rate cut as early as December.
Food inflation, which accounts for
nearly half of the consumption basket, rose to 9.24 per cent in September, compared to 5.66 per cent a month prior
Economists expect food inflation to peak in October and see high chances of the overall inflation print climbing further.
"The Committee
is unlikely to ease until it has some confirmation of the winter disinflation and CPI heading back towards 4 per cent," economists at JP
Morgan said.
"Therefore, we push out our first cut to the February meeting under the assumption that headline CPI continues to soften
after October and is seen to progressively head below 4.5 per cent in early 2025."
RBI Deputy Governor Michael Patra said last week that
the central bank will look through the upcoming inflation "hump" and then make a decision, while Governor Shaktikanta Das said considering
the significant risks that lie ahead, it would not be appropriate to specifically talk about the timing of a rate cut.
"We believe the
first cut could be based on growth, and need not be inflation based, because inflation number may remain somewhat sketchy in coming months,"
Soumya Kanti Ghosh, an economist at State Bank of India, said.
High-frequency indicators such as the manufacturing PMI slowed to an
eight-month low in September, while the services PMI eased to a 10-month trough, latest data showed
India's overall growth slowed to 6.7 per cent in the June quarter.(Only the headline and picture of this report may have been reworked by
the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)First Published: Oct 15 2024 | 11:49 AMIST
