Inflation already closing in on RBI’s ceiling

A key takeaway from the RBI’s policy meeting this week was that the Bank remains relaxed about the inflation outlook, expecting the headline CPI rate to peak within the tolerance band (2-6%) this quarter before dropping towards the 4% target. We aren’t so sure and, in fact, there’s a good chance that January’s CPI data (due on Monday) will show that the headline rate is already at the 6% ceiling. We think it will then rise a little further this quarter, and remain sticky for several months thereafter.