Consumer Prices (Jan.) & Industrial Production (Dec.)

CPI inflation dropped back to a fraction above the RBI’s long-term target in January, its lowest since 2019. It should remain well inside the target band over coming months as easing supply constraints offset a rise in fuel inflation. That would leave the RBI plenty of leeway to keep policy loose to support the recovery. We think that markets are being too hasty in pricing in policy rate hikes.

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