Inflation will remain sticky; base effect to wear out: HSBC

The RBI is likely to wait until the April-June quarter before it starts cutting interest rates, says Leif Eskesen of HSBC Global Research. Many analysts are expecting the apex bank to begin the rate-cutting cycle April onwards and also see the RBI reducing the Cash Reserve Ratio (CRR) in view of tight liquidity.

The RBI is scheduled to announce its fourth mid-quarterly monetary policy review on March 15 and its annual review for 2012-13 on April 17. At its monetary policy review on January 24, the central bank injected Rs 32,000 crore into the system by lowering the CRR to 5.5% but kept the repo rate unchanged.
Inflationary pressures have saddled the Indian market throughout 2011 due to governance bottlenecks, a widening fiscal deficit and rising crude prices. In an interview to CNBC-TV18, he finds that even though inflation has moderated to an extent, he expects headline inflation to still remain sticky because the base effect washes out.