Perspective on CPI data for May 2022 By Mr. Nikhil Gupta, Motilal Oswal Financial Services Ltd
Below is Perspective on CPI data for May 2022 by Mr. Nikhil Gupta, Chief Economist at Motilal Oswal Financial Services Ltd.
“May'22 headline inflation at 7%, in line with our forecast but slightly lower than the market consensus of 7.1%
* Core inflation (ex F&B, F&L and P&T) came in at 3-month low of 6.4% v/s 7.3% in Apr'22 and slightly lower than our forecast of 6.5%.
* Overall, today's data was better than the market consensus and suggest downward bias to RBI's 1QFY23 forecast of 7.5% (7.3% as per our projections). If so, we think a maximum of 25bps rate hike could materialize in Aug'22, after which the RBI should take a pause. Or, the RBI could pause in Aug'22 itself and assess the situation before hiking rates further.
* Nevertheless, inflation is expected to be elevated in FY23, which we expect at 7% v/s RBIs forecast of 6.7%.”
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