Prices likely to rise further: RBI
The tone of the policy document mildly cooled the 10-year G-sec yield while it led a 0.63% fall in BSE Sensex to 32,597.18.
The cautious tone of the central bank on price level and fiscal slippages is possibly an indication that interest rate cycle is bottoming out. “The real problem at this point is that nobody has any clue about how tax revenue flow going to be this fiscal. The government may not have any real take until February next year. So, RBI will have limited elbow room,” Pronab Sen, former chief statistician, told ET Now.
The tone of the policy document mildly cooled the 10-year G-sec yield while it led a 0.63% fall in BSE Sensex to 32,597.18. “The expected uptick in CPI inflation spells a low likelihood of rate cuts in the immediate term. We expect an extended pause for the policy rate as a baseline scenario going into 2018,” ICRA group managing director Naresh Takkar said.
RBI observed the implementation of farm loan waivers by some states, along with a partial rollback of excise duty and VAT in the case of petroleum products, and a fall in revenue on account of lowering GST rates for several goods and services may result in fiscal slippage with attendant implications for inflation.