Today Wholesale Price Index, published from India showed that price dropped further into negative territory. Reserve Bank of India (RBI) has eased monetary policy twice this year as inflation has fallen back within its target range.
Yesterday’s release of CPI showed similar picture in spite of recent gains in oil prices. Indian rupee is trading at 63.92 against dollar, without taking much notice of the release.
What is the impact on RBI’s decision?
- This will be considered as welcome move given years of high price ravaging Indian economy since as of now data doesn’t indicate that deflation getting deeply entrenched in the economy and public’s mind. Today’s release is more of continued sipping effect from last year’s oil price. Release over the next few months would probably expose how Indian inflation is faring with rise in energy prices.
So RBI might keep watch over the upcoming release before announcing any further rate cut.
What are RBI’s focus now?
- Oil price would be key consideration, before delivering any rate cut. Policy easing option diminishes should crude price rise further.
- Recent rout in global bond market would be closely watched along with exodus pressure in Indian Capital account given Fed rate hike this year.
- Indian monsoon would be close watched as forecast predicts lesser than average rainfall, which might give rise to food inflation.
The material has been provided by InstaForex Company – www.instaforex.com