Interest Rate Outlook - Flattish CPI Inflation In June Douses Concerns Of Imminent Policy Normalisation: ICRA
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ICRA Research Report
In its June meeting, the Monetary Policy Committee had kept the policy rates and stance unchanged.
FY22 baseline forecasts were placed as follows: real gross domestic product growth of 9.5%, average consumer price index inflation of 5.1%.
Subsequently, the CPI inflation surged to a higher-than-expected 6.3% in May from 4.23% in April; thereafter, it eased marginally to 6.26% in June, belying market apprehensions of a further hardening, whereas we had expected it to decline to 6.10%.
Status quo on rates and stance likely in the August policy review, with a reiteration of the intention to support growth.
However, an upward revision in the CPI inflation forecast is likely to inject a tone of uneasiness, especially in the individual MPC members’ minutes.
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