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The <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword> (<keyword id="30067" type="General" weightage="100" keywordseo="rbi" source="Orion">RBI</keyword>) can argue its case strongly with the Central government as to why the <keyword id="22195" type="General" weightage="20" keywordseo="inflation" source="Orion">inflation</keyword> was not controlled at 4 per cent, said experts. The RBI's Monetary Policy Committee (MPC) will meet on November 3 to discuss what it would tell the Centre as to why it was not able to restrain the inflation. The RBI may also sound out the Central government as to the course of inflation as well as the reasons as to why it may be at the elevated levels. In <keyword id="3658" type="General" weightage="20" keywordseo="india" source="Orion">India</keyword>, the retail inflation rose to 7.41 per cent in September. Experts were of the view that a combination of global and local (glocal) factors -- geopolitical developments, crop production, reduction in crude oil production and the resulting price increase and depreciating rupee -- are expected to heat up the prices. The RBI on its part is trying to contain the inflation by increasing the repo rate -- the rate at which it lends to the banks. The central bank has increased the repo rate by 190 basis points in recent times and the last one was by 50 basis points last month. "There is a strong case for the RBI arguing that (a) inflation has primarily been caused by supply side shocks with global commodity prices having an impact (b) rupee depreciation has added to imported inflation (c) the RBI on its part was proactive in raising rates even between two policies as it did in May when it saw things were going out of hand post Ukraine war and (d) there have been some measures like increase in goods and services tax (GST) which has added to inflation that was happening in parallel," Madan Sabnavis, Chief Economist, Bank of Baroda, told IANS. "Therefore, there is an explanation as to why inflation was high. But the central bank has been acting to bring it down through the instruments it has like repo and CRR (cash reserve ratio). It has succeeded in lowering surplus liquidity too which can be proved," Sabnavis added. "The RBI can say that inflation is due to supply side constraints a nd excess liquidity," says K. Ramasubramanian, retired General Manager, RBI, and a forex advisor. "In addition, there was a huge sale of forex almost Rs 3 lakh crore to maintain the exchange rate. Inflation which was more than the target continuously for three quarters is estimated to come around 6 per cent by three more quarters. Interest rates (repo rate) have been increased almost 1.9 per cent. As such the MPC may only be constrained to say that the present steps taken need some more time for having a positive impact to reduce inflation. This is subject to the time inconsistency impact," he added. The RBI has scheduled the November 3 meeting of MPC under Section 45ZN of the RBI Act. As per the said Section, when the RBI fails to meet the inflation target, it shall send a report to the central government listing: (a) the reasons for failure to achieve the inflation target; (b) remedial actions proposed to be taken by it; and (c) an estimate of the time-period within which the inflation target shall be achieved pursuant to timely implementation of proposed remedial actions. As per the RBI Act the MPC shall determine the Policy Rate required to achieve the inflation target. Further as per the RBI Act, the central bank shall organise at least four meetings of the MPC in a year. Announcing the credit policy RBI Governor Shaktikanta Das said: "There are also upside risks to food prices. Cereal price pressure is spreading from wheat to rice due to the likely lower kharif paddy production. "The lower sowing for kharif pulses could also cause some pressures. The delayed withdrawal of monsoon and intense rain spells in various regions have already started to impact vegetable prices, especially tomatoes. These risks to food inflation could have an adverse impact on inflation expectations." According to the RBI Governor, the Indian basket crude oil price was around $104 per barrel in H1:2022-23 and expected to be around $100 per barrel in H2: 2022-23. "Taking into account these factors, the inflation projection is retained at 6.7 per cent in 2022-23, with Q2 at 7.1 per cent; Q3 at 6.5 per cent; and Q4 at 5.8 per cent, with risks evenly balanced. CPI (consumer price index) inflation is projected to further reduce to 5.0 per cent in Q1:2023-24," Das said. However, one has to see the RBI's prediction as to crude oil prices ($100 per barrel) as the oil producing countries have announced a cut in their production and the international prices going up. Economists and common man have a different take on the RBI's expectations on inflation. "Presently inflation does appear unlikely that it will move downwards for two sets of factors. The increase in oil price and rupee depreciation has potential to increase imported inflation," Sabnavis had told IANS earlier. "Second, there have been some shortfalls in kharif production which will mean an increase in prices. Also the late withdrawal of rain has affected vegetable crops and also adversely affected the harvest of rice and oilseeds in some regions." The reduction in sown area for rice and pulses during Kharif season is expected to feed inflation in the coming months. The overall sown acreage for the Kharif season has declined by 0.8 per cent at the end of September 30, 2022 as compared to last year, the Bank of Baroda said in a recent report. "The inflation rate will be 6.5-7 per cent in FY23 and 5.5-6 per cent in FY24," Sabnavis had remarked. The RBI Governor had said the communication with the central government is a privileged one and it will not made public by the Bank. Das also said there no legal stipulation on the frequency of the communication between RBI and the government. He had earlier said the inflation rate is expected to come down to four per cent in two years time. There are many uncertainties. The RBI has pegged the inflation rate at 6.7 per cent for FY23. SEE ALSO: <a href="https://www.businessinsider.in/stock-market/news/apple-surges-to-add-178-billion-in-market-value-as-4th-quarter-earnings-help-drive-a-turnaround-in-the-stock-market/articleshow/95153518.cms">Apple surges to add $178 billion in market value as 4th-quarter earnings help drive a turnaround in the stock market</a> <a href="https://www.businessinsider.in/stock-market/news/the-fed-will-hike-rates-too-far-and-tip-the-global-economy-into-a-recession-survey-of-economists-says/articleshow/95151308.cms">The Fed will hike rates too far and tip the global economy into a recession, survey of economists says</a> <a href="https://www.businessinsider.in/thelife/news/see-inside-an-almost-1-million-prefab-tiny-home-village-near-seattle-trying-to-solve-the-ongoing-homelessness-crisis/slidelist/95153993.cms">See inside an almost $1 million prefab tiny home village near Seattle trying to solve the ongoing homelessness crisis</a>

RBI can argue its case on inflation control say experts

New Delhi: <keyword id="19895063" type="General" weightage="20" keywordseo="india" source="keywords">India</keyword> has demonstrated a largely successful inflation targeting regime compared to advanced economies such as the USA, Germany, and France, according to a research report by the <keyword id="19934368" type="General" weightage="100" keywordseo="state-bank-of-india" source="keywords">State Bank of India</keyword> (SBI). The report credits government initiatives, the <keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword>, and banks for addressing these issues over the past decade, allowing for better policy transmission and improved inflation management. "The success of Inflation Targeting in India is largely a byproduct of a vibrant financial ecosystem where <keyword id="23140158" type="General" weightage="20" keywordseo="rbi-government" source="keywords">RBI, Government</keyword> and the Banks are working closely in unison in ushering in market reforms" said the report The report highlighted that India experienced minimal deviations from its inflation targets between 2021 and 2024, setting it apart from other global economies facing greater inflationary challenges. It added that during 2021-2024, India recorded one of the lowest deviations from its inflation targets, highlighting the effectiveness of its inflation control measures. This success, the report points out, is largely a result of coordinated efforts between the <keyword id="19899810" type="General" weightage="20" keywordseo="reserve-bank-of-india" source="keywords">Reserve Bank of India</keyword> (RBI) and the central government. "India had a largely successful inflation targeting regime. Compared to advanced economies like the USA, Germany" said the report. As per the report the synchronization of monetary and fiscal policies, particularly during the pandemic, played a key role in maintaining price stability. It also emphasized that India's pre-inflation targeting regime faced several challenges that hindered the effective transmission of monetary policy. These challenges included sustained fiscal dominance, the presence of a large informal sector, significant informal financing, and inefficiencies in how banks priced their loan products. "Effectiveness of monetary policy in India's pre-Inflation Targeting regime was constrained by several India specific factors that affected transmission of the policy impulses through the interest rate channel" the report added. However, one of the key arguments in the report is that the RBI's inflation targeting has anchored inflationary expectations, even as food inflation remains high. The notion that headline inflation should exclude food prices was dismissed as counterfactual by the report. According to the study, the RBI's success in targeting inflation, despite food price volatility, has prevented a spill-over from food inflation to core inflation. The report stressed that the RBI's consistent communication of its inflation target--set at 4 per cent--has been crucial in successfully anchoring inflation expectations. By reinforcing its commitment to this target, the RBI has helped stabilize inflationary trends across the broader economy. The SBI report reinforces India's effective monetary policy framework, particularly in light of the global inflationary pressures seen in advanced economies like the US and Germany.

India handled inflation much better than US, Germany and France: SBI Report

<ul><li>Retail inflation in October was at a three-month low from a five-month high of 7.41 per cent in September.</li><li>At 6.77 per cent, October's retail inflation is still above the RBI's tolerance band of 6 per cent. </li><li><keyword id="67286" type="General" weightage="20" keywordseo="food-inflation" source="Orion">Food inflation</keyword> in October fell to 7.01 per cent from 8.6 per cent in the previous month</li></ul> New Delhi, Nov 14 (IANS) Retail inflation in October eased to 6.77 per cent, compared to 7.41 per cent in September, yet remained above the RBI's tolerance band of 6 per cent for the 10th straight month, mainly due to high prices of food items. Though food inflation in October fell to 7.01 per cent from 8.6 per cent in the previous month, prices of meat and egg, milk, vegetables, and cereals rose. Retail inflation in October though was at a three-month low from a five-month high of 7.41 per cent in September. Recently the RBI's monetary policy committee held a meeting on November 3 to discuss the reply to be given to the Centre on the central bank's failure to curb inflation within its tolerance limit of below 6 per cent.

Retail inflation eases to a 3-month low of 6.7% in October

<keyword id="3414353" type="General" weightage="20" keywordseo="SP-Global-Ratings" source="Orion">S&amp;P Global Ratings</keyword> on Tuesday said <keyword id="419592" type="General" weightage="20" keywordseo="core-inflation" source="Orion">core inflation</keyword> in India has been declining sequentially, and an elevated 6.25 per cent policy rate limits the need for further rate hikes. The Reserve Bank has increased the short-term lending rate by 225 basis points since May last year to contain <keyword id="22195" type="General" weightage="20" keywordseo="inflation" source="Orion">inflation</keyword>, mostly driven by external factors, especially global supply chain disruption, following the Russia-Ukraine war outbreak. The policy rate now stands at 6.25 per cent. The RBI's rate-setting panel - Monetary Policy Committee (MPC) - will decide on the interest rate on Wednesday. "In India, core inflation has been elevated for longer; however, it eased sequentially in the second half of 2022. An already elevated 6.25 per cent policy rate limits the need for further increases," S&amp;P said in a report. The RBI has been tasked to ensure that retail inflation remains at 4 per cent with a margin of 2 per cent. However, external factors have led retail inflation to remain above the upper tolerance limit for 11 months in a row. In November 2022, the retail inflation came below the 6 per cent level and declined further in December at 5.72 per cent. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/tech/news/google-is-officially-confirmed-to-be-working-on-a-chatgpt-competitor-called-bard/articleshow/97681673.cms">Google is officially confirmed to be working on a ChatGPT competitor called Bard</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/news/rcap-resolution-nclat-issues-notices-to-torrent-investments-others-on-the-lenders-plea/articleshow/97681948.cms">RCap resolution: NCLAT issues notices to Torrent Investments, others on the lender's plea</a>

Declining core inflation limits need for further interest rate hikes by RBI: S&P

Economists are of the view that the measures taken by the <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword> (<keyword id="30067" type="General" weightage="100" keywordseo="rbi" source="Orion">RBI</keyword>) have controlled inflation and add that inflation will come down. A senior economist also said the headline inflation could be 7.5 per cent in December putting a spanner in the inflation projections of the central bank. The RBI's Monetary Policy Committee (MPC) will meet on November 3 to discuss what it would tell the Centre as to why it was not able to restrain the inflation within four per cent + or - two per cent for three consecutive quarters. The RBI may also sound out to the Central government as to the course of inflation as well as the reasons why it may be at elevated levels. India's central bank has been trying to contain inflation by increasing the repo rate -- the rate at which it lends to the banks. The central bank has increased the repo rate by 190 basis points in recent times and the last one was by 50 basis points. In India, the retail inflation rose to 7.41 per cent in September. "The measures taken by the government and RBI have been able to control inflation from the high of 7.8 per cent we had seen in April. The fall in global commodity prices has also been supported in containing inflation. Inflationary expectations have also come down," Rajani Sinha, Chief Economist, CARE Ratings Ltd told IANS. "However, the concern is the stickiness of core inflation above six per cent and the renewed surge in domestic food inflation in the last few months. The measures taken by RBI to control inflation will show further impact with a lag of a few quarters," she added. "There is a strong case for the RBI arguing that (a) inflation has primarily been caused by supply-side shocks with global commodity prices having an impact (b) rupee depreciation has added to imported inflation (c) the RBI on its part was proactive in raising rates even between two policies as it did in May when it saw things were going out of hand post-Ukraine war and (d) there have been some measures like increase in goods and services tax (GST) which has added to inflation that was happening in parallel," Madan Sabnavis, Chief Economist, Bank of Baroda, told IANS. "Therefore, there is an explanation as to why inflation was high. But the central bank has been acting to bring it down through its instruments, like repo and CRR (cash reserve ratio). It has succeeded in lowering surplus liquidity too which can be proved," Sabnavis added. "There was a huge sale of forex almost Rs 3 lakh crore to maintain the exchange rate. Inflation which was more than the target continuously for three quarters is estimated to come to around 6 per cent by three more quarters. Interest rates (repo rate) have increased by almost 1.9 per cent. As such the MPC may only be constrained to say that the present steps taken need some more time for having a positive impact to reduce inflation. This is subject to the time inconsistency impact," K. Ramasubramanian, retired General Manager, RBI, and a forex advisor told IANS. According to Sinha, the CPI inflation is estimated to inch below seven per cent in the next few months due to the base effect and below six per cent by the end of the fiscal year. Looking ahead, Sinha said the RBI could hike the repo rate further by 25-50 bps in the current fiscal year. "As we approach closer to the neutral policy rate, RBI will get more cautious in its rate decision," she added. Citing the unseasonal rain affecting the Kharif crops and the September food inflation at 8.4 per cent Dr Soumya Kanti <keyword id="4757" type="General" weightage="50" keywordseo="ghosh" source="Orion">Ghosh</keyword>, Group Chief Economic Adviser, <keyword id="6354731" type="General" weightage="50" keywordseo="state-bank-of-india" source="Orion">State Bank of India</keyword> said in 2019 when such rains happened, the average food prices more than doubled from 4.9 per cent to 10.9 per cent. Similarly, the headline inflation in December could be 7.5 per cent and could put a spanner to the inflation projections of RBI and market consensus, Ghosh said in a research report. "This could also mean that the terminal repo rate could still be difficult to comprehend at this time, though consensus puts it at 6.5 per cent," Ghosh said. According to Sinha, the <keyword id="6356435" type="General" weightage="50" keywordseo="us-federal-reserve" source="Orion">US Federal Reserve</keyword>'s policy decisions and the consequences on the currency market will also have a bearing on RBI's future policy decisions. Economists said the MPC will not be deciding on the policy rate at their November 3 meeting. "With global commodity prices falling and the likely support of base effect in containing India's CPI inflation in the next few months, RBI is unlikely to be in a tearing hurry," Sinha added. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/india/news/no-scientific-basis-to-two-finger-test-on-rape-survivors-causes-trauma-sc/articleshow/95198492.cms">No scientific basis to two-finger test on rape survivors, causes trauma: SC</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/news/iit-madras-generates-rs-1081-cr-from-funding-and-revenue/articleshow/95200293.cms">IIT Madras generates Rs 1,081 cr from funding and revenue</a>

RBI measures controlled inflation, but challenges remain say economists

Chennai, With the <keyword id="19899810" type="General" weightage="20" keywordseo="reserve-bank-of-india" source="keywords">Reserve Bank of India</keyword>'s (<keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword>) Monetary Policy Committee (MPC) deciding to retain the repo rate at 6.5 per cent, economists are of the view that a rate cut may not happen any time soon or at least for next six months, said senior economists. In a 5:1 decision, the MPC which met on February 6-8, decided to hold the repo rate -- the rate at which the RBI lends to banks -- at 6.5 per cent. The RBI MPC also decided not to change its stance to 'neutral' from 'withdrawal of accommodation'. "It was no surprise that RBI MPC decided to keep the status quo on the interest rates for the sixth consecutive time. However, RBI continued to sound hawkish as against the market expectations and has not provided any indication of the timing of the change in monetary stance from withdrawal of accommodation," said <keyword id="20504468" type="General" weightage="20" keywordseo="suman-chowdhury" source="keywords">Suman Chowdhury</keyword>, Chief Economist and Head - Research, Acuite Ratings &amp; Research. "Given the tone of the MPC statement and the expectation of growth buoyancy, we believe that the likelihood of any rate cut by RBI has significantly reduced over the next six months," Chowdhury added. The RBI MPC will not cut the repo rate ahead of the US Federal Reserve, said Madhavi Arora, Lead Economist, Emkay Global Financial Services. "We understand that shifting debates on global narratives requires the RBI to be flexible as well. We have long maintained that the RBI's policy has been somewhat pegged to the Fed, specifically in the last two years, even as it formally targeted inflation. The swift turn of tone and action pivots of the RBI in the last two years have been influenced purely by global narrative. We do not see RBI preceding the Fed in rate cuts," Arora said. Predicting that RBI will remain cautious owing to high food inflation, CARE Ratings's Chief Economist Rajani Sinha said: "Healthy economic growth gives room to the Central Bank to maintain status quo for some more time." "However, in the second half of the year, as domestic inflationary concerns recede and the US Fed starts cutting rates, we can expect a shallow rate cut by RBI. On the liquidity front, RBI will continue to intervene through appropriate tools as required," Sinha said. <keyword id="20504469" type="General" weightage="20" keywordseo="sujan-hajra" source="keywords">Sujan Hajra</keyword>, Chief Economist &amp; Executive Director, Anand Rathi Shares and Stock Brokers, was also of view that rate cut may not happen any soon and RBI will be on wait and watch mode. "With RBI's inflation projection of 4.5% for FY25, any expectations of cuts coming in the current year become unlikely. We think the progress in food prices will be the key monitorable for RBI's tone in the upcoming policy. Like other central banks, higher growth for the current and next year gives RBI more headroom to be on a wait-and-watch mode," Hajra said. As to the 7% economic growth rate for FY25 stated by RBI Governor <keyword id="19913110" type="General" weightage="20" keywordseo="shaktikanta-das" source="keywords">Shaktikanta Das</keyword>, Chowdhury said: "They have significantly upgraded their growth prospects for the next fiscal to 7.0%, reflecting that there are minimal concerns on economic growth at this time." "RBI's assessment on global growth also appears to be positive versus last year and it also believes that central banks are unlikely to resort to a pivot within a short period. Our outlook on the domestic growth prospects are moderate with a base forecast of 6.3% for FY25, given the visible weakness in the private consumption growth which is estimated at 4.4% in FY24 in the NSO estimates," Chowdhury said. "On the inflation front, the base forecast for headline CPI in FY25 is set at 4.5% which in our opinion has significant upside risks if the growth really maintains such a high level of momentum and if there are even moderate risks in the monsoon behavior," Chowdhury added.

RBI may not cut repo rate any soon or for six months: Economists

New Delhi, Feb 12 () <keyword id="513422" type="PERSON" weightage="20" keywordseo="Retail-inflation">Retail inflation</keyword> jumped to over five-and-a-half-year high of 7.59 per cent in January on persistently high prices of vegetables, pulses and protein-rich meat and fish, government data showed on Wednesday. The <keyword id="134096" type="COMPANY" weightage="20" keywordseo="consumer-price-index">Consumer Price Index</keyword> (CPI)-based inflation was 7.35 per cent in December 2019. It had stood at 1.97 per cent in January 2019. The earlier high was in May 2014 when the CPI-based inflation was 8.33 per cent. The overall food inflation during January this year stood at 13.63 per cent, slightly lower than 14.19 per cent in the previous month, showed the data released by the National Statistical Office under the Ministry of Statistics and Programme Implementation. Food inflation, however, had contracted in January 2019 with a print of (-)2.24 per cent. Inflation in vegetables spurt to 50.19 per cent in January this year, while that for pulses and products, it rose to 16.71 per cent. Among protein-rich items, prices of meat and fish went up by 10.50 per cent during the month, while egg prices were higher by 10.41 per cent against the year-ago period. The food and beverages category showed an inflation print of 11.79 per cent, according to the data. Housing turned costlier by 4.20 per cent in January 2020, while for fuel and light, the inflation print was 3.66 per cent. "The internals of the food inflation are worrying, given a broad-based uptick across categories that tend to be sticky, such as proteins, and a narrower-than-expected reduction in inflation for vegetables. "Moreover, the fairly broad-based rise in the core inflation to 4.1 per cent in January 2020, driven by various services, is a cause for concern," said Aditi Nayar, principal economist, ICRA. Nayar added that regardless of the level of retail inflation, the stance of the RBI for the monetary policy is likely to be retained as accommodative, for as long as the MPC considers the output gap to be negative. "The timing and magnitude of the next rate cut will depend on how quickly inflation appears to be reverting back towards 4 per cent." Rahul Gupta, head of research (currency), Emkay Global Financial Services, said, "It is the consecutive second month that the CPI has breached upper band of the RBI's inflation target... if inflation continues to hover above 6 per cent, we don't expect the RBI (Reserve Bank of India) to cut interest rate or change its accommodative policy stance," said. SEE ALSO: <a href="https://www.businessinsider.in/policy/economy/news/rbi-keeps-the-interest-rates-unchanged/articleshow/72378620.cms?upcache=2" data-type="tilCustomLink" target="_blank">Food inflation will be very high from January to March 2020, warns RBI governor as he keeps interest rates unchanged</a>

You Searched For "rbi inflation" and got 7 results

RBI can argue its case on inflation control say experts

IANS

India handled inflation much better than US, Germany and France: SBI Report

ANI

Retail inflation eases to a 3-month low of 6.7% in October

IANS

Declining core inflation limits need for further interest rate hikes by RBI: S&P

PTI

RBI measures controlled inflation, but challenges remain say economists

IANS

RBI may not cut repo rate any soon or for six months: Economists

IANS

Retail inflation jumps to nearly six-year high as everything from vegetables to pulses to meat and fish get expensive

PTI

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