CPI Inflation for October fell further to 3.3%, the fourth month of consecutive decline, and for Q2 it has run below RBI's estimate of 4%. Oil prices have falled sharply over the last month. In this scenario, it is likely that the MPC will hold or even reduce the its H2 inflation forecast of 3.9-4.5%.
Even using the 4.5% number, the real rate, using the one year treasury bill, is in excess of 2.5%. This is far too high a real rate in this cycle. GDP growth for Q2 has come in at 7.1%, below RBI's estimate of 7.4%. It is now possible that RBI reduces its estimate of GDP growth of 7.4% in the full year 2018-19.
RBI needs to just stay the course and keep the repo rate at 6.5%.
Please see my earlier blogs on Monetary Policy.
Even using the 4.5% number, the real rate, using the one year treasury bill, is in excess of 2.5%. This is far too high a real rate in this cycle. GDP growth for Q2 has come in at 7.1%, below RBI's estimate of 7.4%. It is now possible that RBI reduces its estimate of GDP growth of 7.4% in the full year 2018-19.
RBI needs to just stay the course and keep the repo rate at 6.5%.
Please see my earlier blogs on Monetary Policy.
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