New Delhi, August 16 (IANS). The Reserve Bank of India (RBI) remains in 'wait and watch' mode on policy rates (interest rates) and uncertainty over the resolution of Middle East tensions remains a major risk to manufacturing input costs. This information was given in a report.
In the report issued by Yes Bank, it was said that at present the RBI is in 'wait and watch' mode, ignoring the inflationary pressure coming from the supply side. However, it has been rising steadily, indicating that the recent supply-side shock has not been fully transmitted to consumers.
Due to this, the possibility of interest rates increasing in the coming time is not zero.
Yes Bank has estimated in its note that the wholesale inflation rate is expected to be 9 percent this year and the retail inflation rate is expected to be 4.8 percent.
There remains a difference between retail and wholesale inflation, hence the possibility of the impact of inflation being passed from wholesale to retail cannot be ruled out.
However, the note said, “We think the government will be reluctant to pass the burden of oil companies' under-recovery onto the pump prices of petrol and diesel.”
Core wholesale inflation for July stood at 9.8 per cent year-on-year, in line with expectations (9.75 per cent) and a slight decline from 9.9 per cent in June.
Yes Bank said in its note, “While concerns over input prices have subsided, the key issue is whether this situation will persist given the uncertainty over the resolution of the West Asia crisis. We await the impact of inflation from wholesale to retail. Also, despite expectations of an increase in core retail inflation, we remain firm on our view that the RBI should adopt a 'wait and see' policy and postpone interest rate changes.”
In the wholesale inflation data for July, the rise in prices of key categories remains a matter of concern, as price pressures in manufactured categories continue to increase.
On the producer side, output PPI remained broadly in line with wholesale price trends, while input PPI showed some relief as input costs declined for the second consecutive month; One reason for this was the softening of input prices related to petroleum and chemicals.
However, the note said that most global commodity prices remained stable in July and similar trends are visible for August.
–IANS
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