Retail inflation rises to 3 months high Of 6.52%

NEW DELHI: Retail inflation accelerated to a three-month high in January on the back of rising prices of cereals, eggs, meat, fish and milk, and reversed the easing trend to pose a fresh challenge for policymakers. And this rise was after showing a downward trend in December 2022, when it had slid to 5.72%. According to analysts, the inflation rate has exceeded market expectations, with the optimistic forecast at 5.6%. Lakshmi Iyer, CEO, Kotak Investment shared her outlook on inflation with ET Now.

I think the market consensus was in and around the six percent range with the most bullish number being at about 5.6%. So, by any yardstick or metric, the number has clearly risen above the market's comfort level, aided largely by vegetables and, of course, seed prices. Now as seeded prices have seen an uptick, It remains to be seen if we are going to see some cooling off effect, so therefore not really getting carried away by just one print, but certainly it is an eye-popping number and should have some sort of a market reaction today.

Index of Industrial Production (IIP) which is you know a slightly lag measure which one tracks from a market standpoint has been slowing down. We saw that number also. Today it's very critical to see the US inflation number which also is showing a receding sort of a trend line and we've not really seen too much of an uptick. In fact, US yields were about 3.7 yesterday. So given all that, it doesn't seem to be a given that there is going to be a rate hike in April.

Today markets could react very slowly because the mood is a little bit somber. So maybe about four to five basis points kind of a gap up opening could be pretty possible. So if you see last month, the inflation clearly came down in the US. Again, Powell made a statement a few days back that US inflation is clearly headed on the lower side and markets don't seem to be, you saw the equity markets were up in the US. You saw the bond yields were fairly okay at about 3.75 closer around 3.7%. So markets are not really expecting anything ominous outside in the US this evening. So if that comes pretty much in line with expectation, I believe markets should settle in either direction, as we appear to be nearing the end of the rate hike cycle in India. It's either 25 basis points now or an extended hiatus.

Source: ET Now
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