RBI found it acceptable to target WPI inflation: Axis MF

India Infoline News Service | Mumbai |

This policy further cements the primacy of CPI inflation from the policy stand point

The RBI raised rates unexpectedly, but the bond market has taken the rate increase in its stride. The market has focussed on the guidance that further rate hikes may not be required going forward. The governor indicated that if inflation falls below the indicated trajectory, the RBI may turn accommodative, that is the RBI may cut rates if inflation declines.
This policy further cements the primacy of CPI inflation from the policy stand point. Historically due to the high correlation between WPI and CPI inflation, RBI found it acceptable to target WPI inflation with the expectation that CPI would follow. The past few years have shown that CPI inflation has remained persistently above WPI inflation. The RBI has therefore shifted to explicitly targeting headline CPI inflation. This is as recommended by the recent Dr Urjit Patel committee. The RBI has also accepted another of the committee's recommendations to follow a bimonthly cycle for policy. We expect over a period of time the RBI will implement the other recommendations of the committee.


 

Advertisements

  • Save upto Rs.2.67 lakh with Pradhan Mantri Awas Yojana ...Know more
  • Now Save Rs.3150 on your Demat Account ...Click here
  • Now get IIFL Personal Loan in just 8* hours...APPLY NOW!
  • Get the most detailed result analysis on the web - Real Fast!
  • Actionable & Award-Winning Research on 500 Listed Indian Companies.