Inflation at sub-6% not likely before Feb 2023: Report

NEW DELHI: The inflation prints in the near term is expected to remain higher around 7 per cent, with a gradual move likely towards Monetary Policy Committee’s upper threshold of 6 per cent by end-FY2023.

“We expect inflation to remain elevated with a return to the sub-6 per cent level not likely before February 2023. We maintain our FY2023E average CPI inflation estimate at 6.5 per cent. We also maintain our call for additional 35-60 bps of repo rate hikes to 5.75-6 per cent by end-CY2022,” Kotak Economic Research report said.

The report also said some early signs relief in inflation are visible in the near term due to easing commodity and crude oil prices, normal monsoons and improving reservoir levels, and easing global supply-chain pressures.

Kotak Research expect the CPI inflation trajectory to be lower than the Reserve Bank of India’s (RBI) estimates by 70 basis points in first half of calendar year 2023, and maintain our FY2023E CPI inflation estimate at 6.5 per cent.

To tame inflation and stabilise rupee, the central bank is likely to hike repo rate in the near term. However, the pace of rate hike will be lower due to global disinflationary pressures and pass-through impact of monetary tightening to demand side pressures.

“Accordingly, we maintain our call for further 35-60 basis points of repo rate hikes to 5.75-6 per cent by end-CY2022,” the report added.