India’s Monetary Policy Likely To Stay On Hold In Near Term

India’s central bank is unlikely to change its monetary policy over the coming months, on the backdrop of higher inflation expectations, Shilan Shah, an economist at Capital Economics, said.

Consumer price inflation quickened to a 15-month high of 4.9 percent in November from 3.6 percent in October, data from the Central Statistics Office showed on December 12.

Core inflation jumped to an eight-month high of 4.9 percent from 4.6 percent in October.

Looking ahead, prices pressures are set to rise further over the coming months, the economist said.

Capacity utilization continues to tighten, which in principle should boost core inflation.

Besides this, rural wage growth is set to receive a further boost following the government’s recent announcement of the largest hike in the minimum support price for the rabi crop in five years.

Furthermore, the fiscal outlook is also a cause for concern and a looser fiscal stance could boost aggregate demand and lift inflation expectations, which have risen recently.

“In terms of what this all means for policy, the RBI kept its repo rate on hold at 6.00 percent last week, and policy looks set to stay unchanged over the coming months,” Shah added.
Source: RTT News