The February wholesale price inflation (WPI) figure dropped to 4.68 per cent from 5.05 per cent in January and way below consensus estimates.
February Consumer price Inflation (CPI) food inflation eased to 8.1 per cent against 8.79 per cent on a month-on-month basis (MoM). The drop in inflation was largely on account of a sharp fall in food inflation following a steep reduction in food prices.
Over the last few months the RBI has signalled on a greater focus on CPI inflation reading to target interest rates. The fall in CPI inflation is therefore good news for those looking at policy rate reduction.
The RBI will once again on April 1 meet to decide on policy rates. The central bank has already raised rates thrice since Governor Rajan took over and in his last policy meeting he had clearly hinted that if inflation remains under control, the RBI would have finished with interest rate hikes. The repo rate is now at 8 per cent.
What would be interesting to note at the policy meet would be the tone of the RBI. If it continues to remain hawkish it would not be good for corporate India. In fact, a recent report on Moneycontrol said that if the Reserve Bank (RBI) hikes interest rates any further in the next three to six months, the number of stressed corporates in the BSE 500 will rise in the range of 14 -15 percent, quoting a report by India Ratings suggests.
Clearly, this time the Monetary Policy Review is likely to be a non event. But, one needs to tread with some caution, as the RBI has a tendency to surprise.