RBI likely to go for smaller rate hikes as inflation eases: Report

New Delhi, November 15

India’s annual retail inflation eased to a three-month low of 6.77% in October, helped by a slower rise in food prices and a higher base effect, strengthening bets of smaller rate hikes by the country’s central bank at its meeting next month.

The October reading was higher than the 6.73% forecast by economists in a poll and above the central bank’s tolerance limit, data released by the National Statistics Office on Monday showed. The annual retail inflation was 7.41% in September.

Food prices, which account for nearly 40% of the CPI basket, rose 7.01% in October, compared with 8.60% in September.

Some economists said although inflation had peaked in India, the easing process was likely to remain slow, and it could take up to two years before the inflation rate eased to 4% — the middle level of the Reserve Bank of India’s (RBI) target.

Madan Sabnavis, chief economist at Bank of Baroda, said inflation still faced threats in the food segment, as vegetables and cereal prices did not show signs of a moderation.

“We do expect the RBI to continue to increase the repo rate, albeit by a smaller quantity of 25 bps to 35 bps in the coming policy to be in tune with what other central banks are doing,” he said. — Reuters

Economists expect 25-35 bps increase

We do expect the RBI to continue to increase the repo rate, albeit by a smaller quantity of 25 bps to 35 bps in the coming policy to be in tune with what other central banks are doing. — Madan Sabnavis, chief economist, Bank of Baroda

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