Guv’s inflation remark gives market the blues
Accepting that inflation had increased in the past few years, the RBI governor said in Barabanki, UP, on Wednesday that though the central bank had somewhat succeeded in containing it in the past two years, it is still there. “It is our priority to check price rise and will remain so,” he said.
The Sensex shed 0.85% while the 50-share Nifty slipped 0.90% on Wednesday while bond yields rose by 5 bps. The bond market had been factoring in a 50 bps hike with industrial growth staying sluggish – industrial output shrank 0.1% in November after growing 8.3% in October – but now believes the repo would at best be trimmed by 25 bps. Bonds had rallied last week before Monday's inflation data dashed hopes of a 50 bps cut.
Headline inflation based on wholesale price index dropped to 7.18% for December, the lowest in three years from 7.24% in November while
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