Quote on Inflation Data and Upcoming MPC Rate Decision by Rajeev Sharan, Head of Research, Brickwork Ratings
Below the Quote on Inflation Data and Upcoming MPC Rate Decision by Rajeev Sharan, Head of Research, Brickwork Ratings
"October’s inflation data strengthens the case for a rate hike in December, and we expect the MPC to raise the repo rate by 25 bps to 5.75%. In our view, the bigger question is how far this cycle goes. Headline inflation of 6.09% is largely a food shock, with onion prices up 116%, and higher rates cannot fix a poor harvest. But core inflation, which excludes food and household fuels, rose to 4.65% from 4.47% in September, above the 4% target and still climbing. That is a sign price pressures are spreading beyond food, which is exactly what rate hikes are meant to stop. A 50 bps move looks unnecessary, as Brent has fallen about 11% since the US elections and foreign inflows have returned. We now expect one more 25 bps hike in February, taking the cycle to 6.00%, unless food prices cool faster than expected."
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