RBI may not cut rates despite drop in retail inflation: Motilal Oswal

The Reserve Bank of India (RBI) is unlikely to further ease the interest rates in the next meeting of its Monetary Policy Committee even though retail inflation declined in December 2020, a report by Motilal Oswal Institutional Equities said.

The 'Ecoscope' report noted that the central bank is likely to continue with its calibrated approach towards the management of domestic liquidity.

"It is for the first time since the COVID-19 pandemic began that the CPI inflation has come within the RBI's target inflation range of 2-6%. What remains to be seen is if the downward trajectory in food prices continues during CY21. In any case, we do not expect any further monetary easing and the RBI is likely to continue to manage domestic liquidity in a calibrated manner," it said.

The Consumer Price Index-based retail inflation for December came in at a 14-month low of 4.59 per cent, down from 6.93 per cent in November, due to lower food inflation, showed official data released on Tuesday.

The Motilal Oswal report noted that the retail inflation data for last month was exactly in line with its expectation, but lower than market consensus of 5 per cent.

The Consumer Food Price Index (CFPI) for last month came in at 3.41 per cent, down from 9.50 per cent in November 2020.

The provisional rural CPI in December 2020 was recorded at 4.07 per cent, down from 7.20 per cent in the previous month. The urban CPI was 5.19 per cent in December 2020, compared with 5.19 per cent in November last.

--IANS

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