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.

Post new comment

E-mail ID will not be published
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.

EDITORIAL OF THE DAY

  • India must follow China on its path to the future

    There are many theories, real and imagined, doing the rounds in the national and international media about Barack Obama’s overtures to ‘rebalance

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

Chander Mohan Sethi

CMD, Reckitt Benckiser India

COLUMNIST

Arun Nigavekar

Will the adventurous UGC succeed?

The impact of the Modi government on the education sector ...

Zehra Naqvi

The urge to tell stories

One wants to tell a story, like Scheherzade, in order ...

Dharmendra Khandal

Don’t interfere with nature

Just before we celebrated the news of tiger numbers swelling, ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture