RBI may change rates if inflation touches 5% mark: CARE Ratings

The rating agency said that the inflation trajectory is dependent on how the monsoons fare.

Credit ratings agency CARE Ratings has said that the Reserve Bank of India (RBI) may go for a rate change if the inflation touches 5 per cent mark. “In case, the inflation touches the 5 per cent mark, it could provoke a rate change from the RBI,” CARE Ratings was quoted in the media. 
Notably, an uptick in the wholesale and retail inflation was reported in the month of April. While inflation in wholesale prices was at a 4-month high at 3.1 per cent compared with 2.4 per cent growth in March,  in April, inflation in retail prices rose to 4.5 per cent, higher than 4.2 per cent growth in the last month. The figure for the same period last year was 2.9 per cent.
The rating agency said that the inflation trajectory is dependent on how the monsoons fare. “Going forward, inflation would remain contingent upon turnaround of monsoons. In addition to this, firming of global crude oil prices, HRA increases by state government, implementation of higher MSP from June onwards and demand side pressures from higher fiscal deficit pose risks to price levels,” it said.
The Reserve Bank of India’s next rate decision comes on June 6 and will be hinging on the risks from surging oil prices in Asia’s third-largest economy. 
According to reports, the apex bank expects oil prices averaging around $78 a barrel to stoke inflation by 30 basis points. 
Regarding the retail inflation, the agency forecasts it will be in the range of 4.5-5 per cent and wholesale inflation would be in the range of 3-3.5 per cent during fiscal year 2019.  
However, the rating agency any change in RBI policy regarding rates in the next month’s monetary policy.
Moreover, according to the latest figures, CPI inflation numbers show an increase in retail inflation along all the segments excluding food and beverages which remained more or less stable. Further, non-food components inflation continued to remain at higher levels.
However, India Ratings’ chief economist Devendra Kumar Pant was quoted in the media as saying that the trajectory of RBI’s policy in remainder of FY19 will be governed by the movement of oil prices.
 
(Source: Financial Express, media reports)

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