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The Monetary Policy Committee of the Reserve Bank of India (RBI) has preferred to stand put than surprise the way it did in April. That is par for the course. The inflation print for the last two months seems to indicate that the peak has been passed: The wholesale price index (WPI) inflation fell to -0.9 per cent in April from 1.3 per cent in March, while the consumer price index (CPI) inflation declined to 4.7 per cent from 5.7 per cent. We expect the pause to continue through 2023.
The RBI has communicated that its fight against inflation is not over till it is aligned with its target of 4 per cent on a durable basis. This implies it will not be in a hurry to cut rates. We foresee a rate cut only in January-March 2024.