Making Sense

"Accuracy of Observation is the equivalent of accuracy of Thinking" I wrote about the expectations from the MPC yesterday and as expected RBI hiked repo rate by 25 bps to 6.50%. Consequently, SDF rate now stands at 6.25% and MSF rate at 6.75%. MPC voted 4 - 2 for change in policy rate.  On the change in monetary policy stance, MPC voted 4 - 2 to maintain monetary policy stance " withdrawal of accommodation" Key Highlights from the MPC Rate decision 1. Global growth prospects have improved 2. Domestic growth is likely to be supported by higher Rabi acreage, sustained urban demand, improving rural demand, robust credit expansion, gains in consumer and business optimism and the government’s enhanced thrust on capital expenditure and infrastructure in the Union Budget 2023-24 3. While RBI acknowledged the continuing downward momentum in inflation in FY 24, it estimated inflation to rule above 4% (RBI has an inflation target of 4% +/- 2%) and domestic economic growth to...

Inflation print comes lower than expected India Dec CPI came in lower than consensus estimates with prices rising 5.72% yoy (exp 5.88% CPI est ). The print lower was driven by disinflation in food and beverages where prices fell 1.35% mom. However, the core component, CPI excl f&b and fuels & lighting, continues to be sticky at 6.10%.  Prices slowed for food (4.19% vs 4.67%), pushed down by a 15.1% fall in vegetables; clothing and footwear (9.58% vs 9.83%); and housing (4.47% vs 4.57%). On the other hand, prices rose faster for fuel and light (10.97% vs 10.62%), pan, tobacco, and intoxicants (2.55% vs 2.02%), and miscellaneous (6.17% vs 6.07%) * The 5.7% Dec print , alters the Q4 FY 23 inflation trajectory to an average of 5.36%.  RBI projects CPI inflation for Q1:2023-24 at 5.0 per cent and for Q2 at 5.4 per cent.  The current disinflation is encouraging but the core component continues to be sticky. RBI may hike repo rate by 25 bps in the forthcoming policy...