Cooling of November inflation print could halt rake hike cycle: SBI economists

MUMBAI: With the November inflation data showing that consumer price index (CPI) based inflation cooled to 5.88 per cent in November, economists at the country's largest lender State Bank of India (SBI) opined that since it seems to have come within the RBI's target band this year, it could provide impetus to end the aggressive rate hike cycle.

According to a note by Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser of SBI, the hawkish monetary policy of the central bank, the Reserve Bank of India (RBI) may be able to get domestic inflation under control.

Terming the RBI – which has hiked rates by a cumulative 2.25 per cent since May to fight inflation – as 'hawkish,' the economists said, "Indian headline CPI for the month of November is providing impetus to end of rate hike cycles in India." 

The economists, however, felt that headline inflation would rise up again to be in the 6.5-6.7 per cent range in December 2022-January 2023 and will decline materially to 5 per cent by March 2023. 

Ghosh also said that while domestic inflation may still come under control due to the hawkish monetary policy being followed by RBI, as long as US inflation does not come under control, Fed may have to increase the rate giving incentives for capital outflows from emerging markets resulting into the exchange rate.


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