<p>With retail inflation witnessing significant uptick in May, the Reserve Bank of India (RBI) is likely to maintain status quo in its August monetary policy review, according to a report.</p>.<p>According to the SBI's research report, Ecowrap, inflation may remain elevated in the coming months due to several global and domestic factors.</p>.<p>"We expect a status-quo in August. We believe RBI would still try to find a marriage of convenience of regulatory and developmental measures and monetary policy in August policy," the research report said on Wednesday.</p>.<p><strong>Read more: <a href="https://www.deccanherald.com/business/business-news/as-ai-based-loan-apps-boom-in-india-some-borrowers-miss-out-995411.html" target="_blank">As AI-based loan apps boom in India, some borrowers miss out </a></strong></p>.<p>It further noted that "the die has been cast, but the RBI can still hold out with a firm message of ratcheting up inflationary pressures in the August policy statement."</p>.<p>The Consumer Price Index (CPI)-based inflation hit a six-month high of 6.3 per cent in May, from 4.3 per cent in April. The inflation reading has breached the RBI's target range of 2-6 per cent.</p>.<p>In the second bi-monthly monetary policy announced on June 4, the central bank left the repo rate unchanged at 4 per cent.</p>.<p>The next Monetary Policy Committee (MPC) meeting is scheduled from August 4 to 6.</p>.<p>The report said rising food and commodity prices, as well as localised lockdowns, have led to a sharp increase in headline numbers. The core inflation also increased to 6.55 per cent in and the last time it was seen around this level was in June 2014.</p>.<p>It further noted that inflation may remain elevated going forward and this is likely to raise anxiety levels in the RBI and the MPC.</p>.<p><strong>Read more: <a href="https://www.deccanherald.com/business/economy-business/centre-states-fiscal-position-to-get-better-if-there-is-no-third-covid-19-wave-sbi-report-997514.html" target="_blank">Centre, states' fiscal position to get better if there is no third Covid-19 wave: SBI report </a></strong></p>.<p>"We are now revising our CPI average for FY22 to 6.1 per cent and core inflation is likely to print at 6.4 per cent," the report said.</p>.<p>It said ravages after the second wave of the pandemic and location-specific lockdowns in major Indian states have further dislocated supply chains even in rural areas which are going to manifest in rising prices on essentials.</p>.<p>Cumulatively, this could significantly ratchet up core inflation, it said.</p>.<p>Once that happens on a durable basis, it would be impossible for the MPC to look through inflation pressures and remain supportive of growth, given its primary mandate of ensuring price stability, it said.</p>.<p>"If the RBI has to ultimately increase interest rates / change its stance to combat inflation, it may impact any incipient signs of recovery; on the other hand, being a mute spectator can seriously impair RBI's credibility in fighting inflation," the report added.</p>.<p>The report also said the country must meaningfully vaccinate a large segment of the rural population in the second quarter so that it can effectively beat the new mutant strain in the town.</p>
<p>With retail inflation witnessing significant uptick in May, the Reserve Bank of India (RBI) is likely to maintain status quo in its August monetary policy review, according to a report.</p>.<p>According to the SBI's research report, Ecowrap, inflation may remain elevated in the coming months due to several global and domestic factors.</p>.<p>"We expect a status-quo in August. We believe RBI would still try to find a marriage of convenience of regulatory and developmental measures and monetary policy in August policy," the research report said on Wednesday.</p>.<p><strong>Read more: <a href="https://www.deccanherald.com/business/business-news/as-ai-based-loan-apps-boom-in-india-some-borrowers-miss-out-995411.html" target="_blank">As AI-based loan apps boom in India, some borrowers miss out </a></strong></p>.<p>It further noted that "the die has been cast, but the RBI can still hold out with a firm message of ratcheting up inflationary pressures in the August policy statement."</p>.<p>The Consumer Price Index (CPI)-based inflation hit a six-month high of 6.3 per cent in May, from 4.3 per cent in April. The inflation reading has breached the RBI's target range of 2-6 per cent.</p>.<p>In the second bi-monthly monetary policy announced on June 4, the central bank left the repo rate unchanged at 4 per cent.</p>.<p>The next Monetary Policy Committee (MPC) meeting is scheduled from August 4 to 6.</p>.<p>The report said rising food and commodity prices, as well as localised lockdowns, have led to a sharp increase in headline numbers. The core inflation also increased to 6.55 per cent in and the last time it was seen around this level was in June 2014.</p>.<p>It further noted that inflation may remain elevated going forward and this is likely to raise anxiety levels in the RBI and the MPC.</p>.<p><strong>Read more: <a href="https://www.deccanherald.com/business/economy-business/centre-states-fiscal-position-to-get-better-if-there-is-no-third-covid-19-wave-sbi-report-997514.html" target="_blank">Centre, states' fiscal position to get better if there is no third Covid-19 wave: SBI report </a></strong></p>.<p>"We are now revising our CPI average for FY22 to 6.1 per cent and core inflation is likely to print at 6.4 per cent," the report said.</p>.<p>It said ravages after the second wave of the pandemic and location-specific lockdowns in major Indian states have further dislocated supply chains even in rural areas which are going to manifest in rising prices on essentials.</p>.<p>Cumulatively, this could significantly ratchet up core inflation, it said.</p>.<p>Once that happens on a durable basis, it would be impossible for the MPC to look through inflation pressures and remain supportive of growth, given its primary mandate of ensuring price stability, it said.</p>.<p>"If the RBI has to ultimately increase interest rates / change its stance to combat inflation, it may impact any incipient signs of recovery; on the other hand, being a mute spectator can seriously impair RBI's credibility in fighting inflation," the report added.</p>.<p>The report also said the country must meaningfully vaccinate a large segment of the rural population in the second quarter so that it can effectively beat the new mutant strain in the town.</p>