Most analysts and economists expect RBI to hold key policy rates steady at its Nov 2 policy meet as inflation is seen moderating in the next few months. The expectation of a pause in rate hike is despite a spurt in the headline inflation in September which was more because of grain shortage.
MODERATION IN INFLATION AND GROWTH EXPECTED
* ?With growth and inflation data behind us, we maintain our call of no rate hike at the November meeting,? said Sonal Verma, economist at Nomura Financial Advisory.
* India?s headline inflation rose to 8.62% from 8.5% in August, though down from 11% in April. The government and RBI expect average headline inflation to moderate to 6% by the fiscal end.
* ?On a 3m/3m seasonally adjusted annualised rate, the inflation remains benign with the contribution from manufacturing inflation turning a tad lower,? said Barclays Capital? economists Kumar Rachapudi and Rahul Bajoria.
* India?s industrial output plunged to 5.6% in August from 15.2% in July as growth moderated.
* ?Inflation has come off to high single digits and is likely to come off further as the harvest season nears, lowering food inflation. Moreover, CPI inflation has already come down to a single digit,? Verma of Nomura Financial Advisory, said.
* Food prices have risen in recent weeks after heavy rains damaged grain, vegetables and cash crops in northern belts.
* RBI has raised its key interest rates five times since March 20. It has hiked the reverse repo rate by 175 basis points and the repo rate by 125 basis points.
* On the other hand, non-food manufacturing remained relatively benign at 0.41% in September, compared with 0.42% in August and 1.29% in July.
* ?Given that there are no abnormal signs of demand pull inflation resulting from the economy getting overheated, it is expected that RBI would not tinker with interest rates in its November review,? said CARE economist Madan Sabnavis.