As the Reserve Bank of India gears up for its next Monetary Policy Committee meeting in April, experts weigh in if the central bank will announce another interest rate hike following February’s CPI inflation print of 6.4% – the second straight month of retail inflation persisting way above RBI’s tolerance zone. The core inflation number came in at 6.3%, remaining concerningly sticky, while both numbers are above the RBI’s upper tolerance of 6%.
According to Rajani Sinha, Chief Economist, CareEdge, the possibility of another 25-bps rate hike by RBI in the April meet cannot be ruled out due to elevated core inflation, which has remained sticky at 6.3%. She added that it may take time before the moderation in core inflation in response to the monetary tightening so far and fizzling out of pent-up demand.
On a positive note, Nikhil Gupta, Chief Economist, MOFSL Group, suggested that the worst of inflation may be behind us. He expects headline inflation to fall below 6% in March and further down towards 5% in the coming months. Gupta predicted that a 25 bps hike in April by the RBI is almost certain.
What happens next? What will soften the blow from inflation
Dipti Deshpande, Principal Economist, CRISIL, added that while fuel inflation has begun to ease on softer crude oil prices, food and core continue to be the pain points with inflation rates above 6%. Hence, another rate hike by the RBI in April cannot be ruled out. Madhavi Arora, Lead – Economist, Emkay Global Financial Services, believes that the inflation outlook is fraught with uncertainty. She said that she sees Q4FY23 inflation overshooting the RBI’s revised forecast by 45-50 bps, assuming that there are no past data revisions. Despite this, she retains her FY24 forecast at 5.2%. Arora expects the RBI to announce another 25 bps hike in April and to be non-committal on the future rates path, as the fluid global situation demands frequent macro re-assessments.
Lastly, Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities, shared that the RBI will remain hawkish in the April policy due to spiked inflation prints over 6% in January-February, along with sticky core inflation rates above 6%. Rakshit also expects a 25 bps repo rate hike in the April policy.