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ASSOCHAM expects the Reserve Bank of India (RBI) to keep key interest rates unchanged in its monetary policy review due on February 7, more so as inflation is forecast to stay high as it breached the authority’s target.
In a communication addressed to RBI Governor, Dr Urjit R. Patel, the ASSOCHAM highlighted that divergence in sequential trend in consumer price index (CPI) and wholesale price inflation (WPI) in December was driven by food inflation and impact of higher housing inflation.
“The dip in the inflation for primary food articles in the WPI for December 2017 may signal some correction in the CPI inflation for food items in the ongoing month,” said Mr D.S. Rawat, secretary general of ASSOCHAM in a communication addressed to Dr Patel.
“This leaves very little leeway for the RBI to cut rates,” he added.
While wholesale food inflation decelerated to 4.72 per cent in December against 6.06 per cent in November, food inflation increased to 9.16 per cent against 8.82 per cent during the same period.
Besides CPI accelerated to 17-month high of 5.21 per cent in December from 4.88 per cent a month ago. The retail inflation ranges for second half of current fiscal to 4.3-4.7 per cent from 4.2-4.6 per cent projected in October on account of rising global crude oil prices.