RBI to stay hawkish even as inflation likely peaked: DBS

Bloomberg

India’s inflation likely peaked in September but that’s unlikely to convince the central bank at this point to halt its tightening cycle, according to DBS Bank Ltd.
“A bump up is expected in September numbers,” DBS Bank Senior Economist Radhika Rao said in an interview with Bloomberg Television’s Juliette Saly and Rishaad Salamat on Wednesday. “But the good news is that, this is likely the peak and as we head into the end of the fiscal year, inflation numbers should begin to soften.”
India’s consumer-price inflation probably accelerated to 7.36% last month — much higher than the Reserve Bank of India’s (RBI) tolerance limit of 6% — according to a Bloomberg survey of economists.
“At this point in time monetary policy committee is much more confident on growth than inflation and this
will push them to keep their hawkish bent,” Rao said.
DBS is penciling in 60 basis points more of policy rate hikes until February. The central bank is scheduled to announce its next rate decision on December 7 and there is a broad consensus among economists that it will continue to tighten after raising borrowing cost by a total of 190 basis points this year.
“Inflation will wind up at 5.5%-5.8% by end of this fiscal year,” Rao said, adding the current high level is due to various factors, including base effect and pre-harvest seasonal lift in food prices “that is offsetting interim relief you have seen from commodity prices.”