S&P Global Ratings, on Tuesday, said core inflation in India has been declining sequentially, and an elevated 6.25% policy rate limits the need for further rate hikes.
The Reserve Bank has increased the short-term lending rate by 225 basis points since May last year to contain the inflation, which was mostly driven by external factors, especially global supply chain disruption, following the Russia-Ukraine war outbreak.
The policy rate now stands at 6.25%. The RBI's rate-setting panel, Monetary Policy Committee (MPC), will decide the interest rate on Wednesday.
"In India, core inflation has been elevated for longer; however, it eased sequentially in the second half of 2022. An already elevated 6.25% policy rate limits the need for further increases," S&P said in a report.
The RBI has been tasked to ensure that retail inflation remains at 4% with a margin of 2%. However, external factors have led retail inflation to remain above the upper tolerance limit for 11 months in a row. In November 2022, the retail inflation came below the 6% level and declined further in December at 5.72%.
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