RBI unlikely to cut rates, change stance in August policy amid food price pressure, say economists

Reserve Bank of India

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) is unlikely to cut rates and change stance in the August monetary policy given the continued pressure seen in food prices, which pushed India’s retail inflation to four-month high, economists told Moneycontrol.

“The RBI is likely to look through these statistical factors and is unlikely to act on the policy rate or stance in the August policy given the continued pressure seen in food prices,” said Sakshi Gupta, Economist at HDFC Bank.

Adding to this, Gaura Sen Gupta, Economist, IDFC First Bank said with growth conditions remaining on the stronger side, policy focus will be purely on inflation.

In June, CPI inflation rose to a four-month high of 5.08 percent compared to 4.75 percent in the previous month, as food inflation rose to 9.4 percent.

Inflation had dipped to a 12-month low of 4.75 percent in the previous month, despite food inflation hovering around 8.7 percent.

June marks the eighth consecutive month recording over 8 percent inflation, data released on July 12 showed.

Sequentially, consumer price index, which is used to measure food inflation, was up 1.33 percent compared to the previous month, with food prices rising 3.17 percent in June.

Within food, inflation in vegetable and pulse prices continued to remain in double digits with 29.3 percent and 16.1 percent rise, respectively.

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