Easing cycle at an end

Policy rates look set to be kept on hold at the conclusion of the RBI’s meeting on Thursday 6th February. Further ahead, the analyst consensus still expects a resumption in the easing cycle once food inflation has dropped back. We disagree. In fact, with the effect of past stimulus likely to be felt gradually over the coming months and core inflation set to rise, we expect the RBI to switch to tightening mode by the end of the year.