CPI Dips On Food, IIP On DeMo
Feb 14, 2017 | 11:35 AM IST
Feb 14, 2017 | 11:35 AM IST
CPI inflation could see upside pressures hereon as some benefits from a high-base effect will begin to wear out and as the imported component of inflation nudges up. Also, as the economy is remonetised, some pent-up demand will have returned. The stickiness in core inflation despite continued decline in other parts of the index is a worry since wage-price negotiations based on a sticky core can potentially lift overall inflation.
The Monetary Policy Committee (MPC) review of February 8 reiterated its medium-term inflation target of 4%. Given the inflationary pressures in the economy, policy space now remains constricted. The repo rate was accordingly left unchanged at 6.25%, and the monetary policy stance was shifted from being accommodative to neutral. That could very well mark the end of the current rate cut cycle, which began in January 2015 at least in the near term. The shift reflects the central banks decision to exert caution on the inflation front in its journey towards the medium-term inflation target.
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