InvestorQ : With inflation falling sharply in this month, do you believe that any rate hikes by the RBI are unlikely?
Rutuja Nigam made post

With inflation falling sharply in this month, do you believe that any rate hikes by the RBI are unlikely?

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1 month ago
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Inflation fell sharply from 5.52% in March 2021 to 4.29% in April 2021. To an extent, this was also base effect because the inflation in Mar-20 was 8.2% so some amount of normalization was expected. CPI retail inflation eased due to the food inflation falling from 4.87% in Mar-21 to 2.02% in Apr-21. You could see vegetable inflation, cereal inflation getting deeper into the negative even as urban inflation stayed well above rural inflation.

The latest inflation announcement keeps the inflation rate very close to the median level of 4% as desired by the RBI under normal conditions. This gives justifiable reason for the RBI to hold repo rates and also maintain the accommodative stance. The inflation was close to the estimates put out but the big risk from here on could be US inflation. With the sharp spike, even if inflation is subdued in India, you could see rate hike if the US hikes rates.

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