November CPI inflation will nudge RBI to stop rate hike cycle: SBI economists

The November inflation print of 5.88 per cent provided impetus to end the rate hike cycle, economists at the country’s largest lender SBI said on Monday. Their views came hours after the official data showed that Consumer Price Index (CPI)-based inflation cooled to 5.88 per cent in November, the first time that it has come within the RBI’s target band this year.

Terming the RBI – which has hiked rates by a cumulative 2.25 per cent since May to fight inflation – as “hawkish”, the economists said: “Indian headline CPI for the month of November is providing impetus to end of rate hike cycles in India.” 

According to their note, the hawkish monetary policy may be able to get domestic inflation under control.

They added that as long as US inflation did not come under control, the Federal Reserve might have to increase rates, giving incentives for capital outflows from emerging markets, resulting in exchange rate volatility and currency depreciation. 

The economists, however, felt that headline inflation would rise up again to be in the 6.5-6.7 per cent range in December 2022-January 2023 and will decline materially to 5 per cent by March 2023. 

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