"Our recent projections indicate that December 2016 CPI reading will be sub-4 percent while at least 4-5 readings in FY17 will be sub 4.5 per cent," SBI Research said in its Ecowrap report. The decline in inflation trajectory is expected to be driven by several factors like fall in pulse prices, projection of above normal monsoon, among others. "From historical data, it can be inferred that there is a clear downside of at least 60 basis points to headline CPI numbers over the medium-term," the report said, adding that this alone will pull down CPI to sub-4.5 percent. The distribution of core CPI over the last 20 months indicates a nicely shaped Bell curve, with mean CPI at 4.5 percent, it added.
On RBI's monetary policy stance, the report said the Central Bank is expected to go for a 50 basis points cut in key policy rates this fiscal. "We are still maintaining a 50 bps repo rate cut in FY17, though we believe RBI may go more aggressive on liquidity for rate transmission in Q2FY17," it said.
On RBI's monetary policy stance, the report said the Central Bank is expected to go for a 50 basis points cut in key policy rates this fiscal. "We are still maintaining a 50 bps repo rate cut in FY17, though we believe RBI may go more aggressive on liquidity for rate transmission in Q2FY17," it said.
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