Market estimate of Oct inflation as per Reuters poll is 6.73% with estimates ranging between 6.40% - 7.35%. My own estimates show the inflation print to be 6.60% based on average mom trend over the last decade. A print of 6.56% will be considered benign. A print lower than 6.70% will suggest inflation to evolve along RBI suggested rate trajectory with Q3 averaging 6.50% and then decline by March below the 6.00% level. My concern emanates from a print closer to 7% where RBI would be forced to raise rates by 50 bps in December meeting and the market would be quick to price terminal rate at 7% instead of the current 6.75%.
Considering no commodity shock and lower inflation on seasonality trends , interest rate markets have shown receiving interest over the last month.
We keep a close eye on CPI inflation data to see if more hawkishness needs to be built in to the price. Remember, I have been mentioning that more hawkishness will be a function of how usdinr behaves as absence global shocks, trajectory of inflation is lower.
Comments
Post a Comment