Inflation: Fog of war1 min read . Updated: 14 Mar 2023, 12:13 AM IST
The inflation rate will now have to drop substantially in March for RBI’s 5.7% estimate for this quarter to come good
India’s retail inflation eased to 6.44% in February from 6.52% in January, according to government data released on Monday. This, however, is hardly comforting, given that it’s still well above the Reserve Bank of India’s (RBI) 6% upper bound. The rate will now have to drop substantially in March for RBI’s 5.7% estimate for this quarter to come good. An anticipated cool-off in food prices might help, but core inflation remains sticky and could compel the central bank to revisit its calculations. Elevated inflation also strengthens the case for continued rate hikes. But with economic growth slipping to 4.4% in the quarter ended December and other weaknesses expected, that decision may not be straightforward. Meanwhile, which way monetary policy goes in the US, which will have a bearing on RBI’s approach, is going through another round of guessing. After Silicon Valley Bank’s collapse was followed by Signature Bank’s in quick succession, Goldman Sachs no longer sees the Federal Reserve hiking its policy rate next week. Sudden clouds of uncertainty have arisen from the very war against inflation. And that makes policy calls even trickier for central banks to take.