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Average FY22 inflation at 6% a possibility; rate hike in Aug policy unlikely: SBI’s Soumya Kanti Ghosh

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Inflation has risen to its highest level in six months. Retail inflation in May accelerated by 6.3 percent which is above the RBI target range of 2 to 6 percent. Further, the rise in core inflation has also touched 6.6 percent. In an interview with CNBC-TV18, Soumya Kanti Ghosh, group chief economic advisor at State Bank of India (SBI), and Lakshmi Iyer, CIO-debt & head product at Kotak Mahindra AMC, spoke at length about the numbers.

Inflation has risen to its highest level in six months. Retail inflation in May accelerated by 6.3 percent which is above the RBI target range of 2 to 6 percent. Further, the rise in core inflation has also touched 6.6 percent. In an interview with CNBC-TV18, Soumya Kanti Ghosh, group chief economic advisor at State Bank of India (SBI), and Lakshmi Iyer, CIO-debt & head product at Kotak Mahindra AMC, spoke at length about the numbers.
First up, Ghosh said, “We are still working out the intricacies of annual inflation, but now the annual average rate for full FY22 should be closer to 6 percent. Yesterday’s number, which has come out, is not related to statistical base because the core inflation is highest since June 2013, the momentum in core inflation month-on-month and overall headline inflation is the highest since April ’20.”
On RBI policy, he said, “I am not expecting a hike in interest rates in the August policy, because the RBI will look through the data as some of the inflation numbers could be persistent and disturbing.”
Meanwhile, Iyer said that the RBI should be looking closely into inflation trends, if they continue at current levels.
“If the next couple of inflation numbers don’t show a mellowing downtrend, then it looks like there will be at least a 50-70 bps upward movement in the overall inflation forecast, and that puts the number closer to little under 6 percent or thereabouts. Two back-to-back years on the right-hand side band of the inflation range may not be great from the central bank’s perspective also. So that’s going to be a worrisome factor,” she said.
For the entire discussion, watch the video.

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