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Monetary policy to remain unchanged in near term: ICRA

A number of factors suggest that retail inflation would remain sticky in this calendar year, ICRA says

March 08, 2014 1:42 IST | India Infoline News Service
CPI inflation expected to ease to 8.5% in Feb 2014, close to the Dec 2014 target of 8%; however, CPI is likely to remain sticky, preventing near-term monetary easing.
Further correction in vegetable prices and a healthy rabi harvest are expected to manifest in an easing of headline CPI inflation (CPI-combined) to 8.5% in February 2014 from 8.8% in January 2014, only moderately higher than the target of 8% for December 2014 set by the proposed framework for monetary policy.
However, a number of factors suggest that retail inflation would remain sticky in this calendar year. Moreover, the possibility of sub-par monsoon rainfall has emerged as a key risk factor for the inflation trajectory. Accordingly, ICRA expects the monetary policy stance to remain unchanged in the near term, keeping interest rates elevated.

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