RBI Likely To Hold Repo Rate In October Policy Meet: Experts

August's retail inflation, at 6.69%, was lower than the 6.85% forecast in a Reuters poll of analysts and the 6.73% registered in July.

RBI Likely To Hold Repo Rate In October Policy Meet: Experts

Annual retail inflation eased slightly in August as food prices cooled, government data showed on Monday.

August's retail inflation, at 6.69 per cent, was lower than the 6.85 per cent forecast in a Reuters poll of analysts and the 6.73 per cent registered in July.

Here is what experts say on the August inflation number:

Aditi Nayar, Principal Economist, ICRA, Gurugram

"With the CPI inflation for August 2020 sticky at a sharp 6.7 per cent, and unlikely to recede meaningfully in September 2020, a repo cut in the upcoming policy review seems to be virtually ruled out."

"Moreover, the CPI inflation is expected to print sub-4 per cent only in December 2020-February 2021, based on which a continuation of the accommodative stance appears doubtful."

Kunal Kundu, India Economist, Societe Generale, Bengaluru

"While still way above the RBI's upper target range of 6 per cent, the August data might mean that inflation has finally peaked and is slowly on its way down. Even the July inflation has be revised down from 6.89 per cent to 6.73 per cent."

"We continue to believe that the high levels of elevated inflation is transitory and would not last long, especially in the situation of such widespread demand destruction."

"We expected headline inflation to ease significantly by 4Q20 as food prices wane and high statistical base effect further pulls down the headline inflation. We expect the RBI to opt for an additional 50 basis point rate cut, likely starting from 4Q 2020."

Garima Kapoor, Economist - Institutional Equities, Elara Capital, Mumbai

"The CPI inflation for August at 6.69 per cent surprised on the downside compared to our expectation of 7 per cent. Even as the headline print remained elevated on account of unfavorable base, lower incremental built up in components such as food and beverages and downward revision to data of previous month was comforting. We believe improvement in data collection efficacy is contributing to the same."

"Although we expect the headline inflation in the coming months to trend lower as seasonality kicks in and supply chains normalize, the inflation prints will remain above 6 per cent even in September, constraining the ability of MPC to cut rates even as output gap remains glaring."

Anagha Deodhar, Economist, ICICI Securities, Mumbai

"In sequential terms, headline number has eased moderately to 6.69 per cent from 6.73 per cent. However, it is still significantly higher than the upper limit of MPC's comfort level."

"Persistently high food inflation points to supply side constraints feeding into high inflation. Also, transportation inflation increased to an all-time high in new series and personal care costs inflation increased to 101-month high in August."

"Core inflation eased moderately to 5.8 per cent from 5.9 per cent. We expect inflation to come down meaningfully only in the second half due to favourable base effect. We don't expect moderate easing in the current print to tilt the scales in favour of a rate cut."

Sakshi Gupta, Senior Economist, HDFC Bank, Gurugram

"Inflation print came in closer to our expectation for August (HDFC Bank estimate of 6.6 per cent), signalling that price pressures seem to have peaked in July. The August print and our expectation of inflation remaining above 6 per cent even in September means that the space for monetary action in October is almost absent. We expect 25-50 bps rate cut in the December and February meeting contingent on the inflation trajectory."

"We expect inflation to average above 5 per cent for the year. After today's slightly positive inflation surprise, bond yields could move marginally lower tomorrow. However, given the borrowing pressures building up, we expect 6 per cent to be the floor for the 10 year in the near term."

Upasna Bhardwaj, Senior Economist, Kotak Mahindra Bank, Mumbai

"While CPI inflation reading continues to remain uncomfortably elevated, it has started to trend lower, providing some relief. However, several uncertainties remain ahead as supply side disruptions continue to dominate the weaker demand side pressures along with one-off idiosyncratic factors weighing on core inflation. Going ahead, as inflation remains elevated in the near term we see limited room for policy easing at least through the December policy."

Madan Sabnavis, Chief Economist, Care Ratings, Mumbai

"Quite clearly the MPC will keep this number at the back of the mind when evaluating its decision in the next meeting. Inflation is well above the threshold of 6 per cent while growth has slipped quite sharply. The liquidity situation is comfortable while bank credit growth has been negative. Under these conditions the decision may steer towards another pause in policy action."

Rupa Rege Nitsure, Group Chief Economist, L&T Financial Holdings, Mumbai

"CPI headline at 6.7 per cent is close to what I had projected. While sequentially pulses and fuel inflation rates have somewhat eased, inching up of overall food, housing and core inflation has kept the print elevated at 6.7 per cent - way above the RBI's comfort zone. I don't expect any rate action in the remaining part of calendar 2020. There isn't any need for that either. The RBI has been supporting yields through liquidity support, which is more than enough."