RBI likely to be in pause mode till Dec: BofA-ML

Tags: News
The Reserve Bank of India is likely to be in a "pause" mode till December, as rising El Nino risks threaten the monsoon, a Bank of America Merrill Lynch report said.

According to the global financial services major, inflation pressures are likely to remain as a possible El Nino could affect the monsoon, which in turn would push up food prices.

"On balance, we expect the RBI to pause till December, with rising El Nino risks threatening the monsoon," the report said, adding that a "5 per cent swing in food prices impacts CPI inflation by 250 basis points".

The RBI's target is to ease retail inflation, as measured by the Consumer Price Index, to 8 per cent by January 2015 and 6 per cent by January 2016.

Both retail and wholesale price inflation accelerated in March due to rising food prices. While wholesale inflation rose to a three-month high of 5.7 per cent, retail inflation inched up to 8.31 per cent, after softening for three straight months since December.

The RBI had increased the key policy repo rate three times since Raghuram Rajan took over as Governor in September.

El Nino refers to the warmer-than-average sea surface temperature in the central and eastern tropical Pacific Ocean. This condition occurs every 4-12 years and had last impacted India's monsoon in 2009, leading to the worst drought in almost four decades.

If El Nino occurs by summer, it will drive rain clouds away and impact the June-September monsoon. If it stretches to the fall, India will mercifully escape, it added.

EDITORIAL OF THE DAY

  • The talent to make things grow big must be rewarded without a ceiling

    Executive pay has always been a hotly debated topic, mainly because it involves a lot of money.

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

Sarthak Raychaudhuri

vice-president, HR, Asia South Whirlpool of India

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

TODAY'S COLUMNS

Roopen Roy

How leaders groom future leaders

As writer Tom Peters said, “Leaders do not create followers, ...

Rajgopal Nidamboor

Pluralistic essence of our being

Our new understanding of the mind through the rapidly expanding ...

Dharmendra Khandal

Have you spotted those wasps, yet?

Wasps are insects that ride on the monsoon winds. I ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture