India’s central bank to raise its inflation forecast in June

India’s central bank to raise its inflation forecast in June

Banking















Bloomberg

India’s central bank will raise its inflation forecast in the June monetary policy meeting amid elevated commodity prices, possibly setting the stage for more interest rate increases by August, a person familiar with the matter said.

There is also a growing chance that inflation will breach the upper end of the Reserve Bank of India’s (RBI) targeted 2%-6% range for the next two quarters as a shortage of coal and edible oils would feed into the readings, said the

person who declined to be identified as the discussions are private.

That means the inflation rate would have breached the RBI’s accepted range for three straight quarters, and the central bank will have to write a letter to the government, as laid down by law, explaining why it failed to keep costs under check. It will also have to lay out remedial measures.

Analysts like Radhika Rao, a senior economist at DBS Group Holdings Ltd., Singapore, expect the central bank to raise its inflation projections by as much as 70 basis points next month.

The RBI raised key rates for the first time in nearly four years and moved to drain