“While we do not disagree that food inflation is likely to ease going forward on the back of a gradual normalization of supply, we are not convinced that headline inflation will drop very much as overall food inflation may not decline notably,” he added.
Pointing out that inflation risks remain tilted to the upside and so further monetary tightening is needed, HSBC Global Research said the central bank may have to raise rates.
Nomura said the RBI is moving towards CPI inflation as its nominal anchor.
“Though taking a wait-and-see approach, we believe that the RBI is implicitly moving towards CPI inflation as its new nominal anchor; hence, future policy direction will be guided by the outlook on CPI inflation,” Nomura said in its report, adding that it will wait for the recommendations of the committee headed by Deputy Governor Urijit Patel.
Managing Director of Capri Global Capital P H Ravikumar said low core inflation supported RBI's moves. “It must be borne in mind that in support of this decision the WPI core inflation (excluding fuel and food inflation components) is at just 2.65 per cent,” Ravikumar said.
