Rating agency ICRA expects a low likelihood for rate cut by Reserve Bank of India prior to the April 2015 policy meeting.
“We maintain our view of 50 bps of Repo rate cuts over the next few quarters, with a low likelihood of a rate cut prior to the April 2015 policy meeting,” according to ICRA.
As expected, food inflation has rebounded considerably post the waning of the favourable base effect. Double-digit inflation for perishables such as vegetables and fruit as well as pulses (post the unfavourable kharif harvest and lagging rabi sowing) highlight that structural causes for high food inflation in India have not dissipated and remain key risks going forward.
Following the increase in the price of the Indian crude oil basket, retail prices of diesel and petrol have been raised by Rs. 0.61/litre and Rs. 0.82/litre from February 16, 2015 onwards. However, crude oil and retail fuel prices are considerably lower than the year-ago period, which would continue to dampen y-o-y WPI inflation.
The WPI print of -0.4% is along expected lines, with lower commodity prices dampening inflation related to minerals, fuels as well as various commodity-intensive manufactured products.
“We do not expect this reading to significantly influence the timing or extent of subsequent Repo rate cuts, given that CPI inflation is the nominal anchor for monetary policy,” ICRA said.
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