Key Points
Madhavi Arora, lead economist at Emkay Global, noted that markets are expecting inflation to exceed 6% in July, prompting a "repricing" in rate cut expectations..
The recent rise in inflation has prompted Indian investors to push back rate cut expectations by at least a quarter to the middle of 2024, with a sustained rise in prices likely to prompt a further repricing, traders and analysts said on Monday.. Surging food prices accelerated India's annual retail inflation rate in June to 4.81%, above the polled estimate of 4.58%, snapping four months of easing...
"Rate cut bets are getting re-priced as markets are now expecting inflation to overshoot above 6% in July and upward pressure in the coming quarter," said Madhavi Arora, lead economist at financial services firm Emkay Global...
"There is absolutely no rate cut in the OIS 1-year price anymore," a senior trader at a foreign bank said, adding that "no one would have bet on a rate cut in India through 2024," if rate cuts in the United States were not a consideration...
"The market for now expects the Reserve Bank of India (RBI) to look through these prints as it is isolated to vegetable price inflation, the seasonality of which is well known and unlikely there will be any second round effects due to that," a senior trader at a private bank said.. "Also since WPI continues to soften, soft goods inflation will keep core inflation steady," the trader added...
