1/29/2014 CPI inflation to rule above RBI's comfort levels, rate cut may not be imminent - The Economic Times

http://economictimes.indiatimes.com/news/economy/policy/cpi-inflation-to-rule-above-rbis-comfort-levels-rate-cut-may-not-be-imminent/articleshow/29515901.cms 1/5

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CPI inflation to rule above RBI's comfortlevels, rate cut may not be imminent

READ MORE ON » WPI inflation | Wholesale price index | Urjit Patel committee | Repo rate | RBI | Raghuram Rajan |monetary policy

KOLKATA: An interest rate cut does not

appear imminent since monetary policy is

likely to be driven by consumer price inflation

or CPI data, which is expected to stay way

above the Reserve Bank of India's comfort

level. CPI inflation will be 8.9% in the second

quarter of 2014-15 and average 8.5% for the

entire fiscal, according to a survey of experts,

putting paid to hopes of a rate cut.

The banking regulator has said it wants to

bring down inflation to a low and stable level

before allowing monetary policy to contribute

to the revival of consumption and investment

in a sustainable manner.

"You should really watch the trends in inflation

and deposits, which really impact the cost of

funds. You cannot say something very quickly

(on possible rate cut)," ICICI BSE 0.96 %

Bank's managing director and chief

executive Chanda Kochhar said. The RBI

has raised repo rate by 25 basis points to

8%, although CPI inflation eased to a three-

month low of 9.87% in December.

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1/29/2014 CPI inflation to rule above RBI's comfort levels, rate cut may not be imminent - The Economic Times

http://economictimes.indiatimes.com/news/economy/policy/cpi-inflation-to-rule-above-rbis-comfort-levels-rate-cut-may-not-be-imminent/articleshow/29515901.cms 2/5

nullET SPECIAL: Save precious time tracking your

investmentsThe regulator has expressed concerns over

high inflation putting pressure on the rupee

and acting as an inequitable tax on the poor.

The RBI expects CPI inflation to come down to 8% over the next 12 months. CARE Ratings

chief economist Madan Sabnavis said interest interest rates would be lowered provided CPI

comes below or falls continuously towards this mark. "There is definitely little scope for

interest rate relaxation now unless CPI inflation comes down," he said.

Growth expectations for 2013-14 have remained unchanged, while inflation based on the

wholesale price index (WPI) is expected to be higher than earlier estimated. Retail inflation

measured by the CPI is likely to moderate this quarter from the current levels due to further

seasonal softening in vegetables and fruit prices.

However, CPI, excluding food and fuel inflation, is expected to remain elevated, putting

pressure on the headline CPI inflation, which may remain above 9% in the rest of 2013-14.

"Elevated interest rates remain a challenge for the industry.

However, the RBI's current read on inflation seems to have left them with not much of a

choice," Federal Bank's managing director and chief executive Shyam Srinivasan said.

The future policy is expected to be based on the path recommended by Urjit Patel

Committee on disinflation that has set an objective of below 8% CPI inflation by January

1/29/2014 CPI inflation to rule above RBI's comfort levels, rate cut may not be imminent - The Economic Times

http://economictimes.indiatimes.com/news/economy/policy/cpi-inflation-to-rule-above-rbis-comfort-levels-rate-cut-may-not-be-imminent/articleshow/29515901.cms 3/5

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RBI projects modest economicrecovery to set in next fiscal

2015 and below 6% by January 2016.

The RBI said inflation could moderate over the next fiscal. CPI inflation is expected to range

between 7.5% and 8.5% in the fourth quarter of 2014-15, albeit with an upward bias.

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1/29/2014 CPI inflation to rule above RBI's comfort levels, rate cut may not be imminent - The Economic Times

http://economictimes.indiatimes.com/news/economy/policy/cpi-inflation-to-rule-above-rbis-comfort-levels-rate-cut-may-not-be-imminent/articleshow/29515901.cms 4/5

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1/29/2014 CPI inflation to rule above RBI's comfort levels, rate cut may not be imminent - The Economic Times

http://economictimes.indiatimes.com/news/economy/policy/cpi-inflation-to-rule-above-rbis-comfort-levels-rate-cut-may-not-be-imminent/articleshow/29515901.cms 5/5

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