Moody’s said that despite the near-term uptick, retail inflation should moderate toward the Reserve Bank’s target in the coming months as food prices ease amid higher sowing and adequate food grain buffer stocks.
The retail inflation scaled to a 14-month high of 6.21, breaching the RBI’s upper tolerance limit, on a sharp jump in vegetable prices.
The agency said sporadic food price pressures continue to inject volatility in the disinflation trajectory.
“Potential risks to inflation from heightened geopolitical tensions and extreme weather events underscore the RBI’s cautious approach to policy easing. Although the central bank shifted its monetary policy stance to neutral while keeping the repo rate steady at 6.5 per cent in October, it will likely retain relatively tight monetary policy settings into next year, given the inflation risks,” Moody’s said.
