Indian Pulse Media
Buisness

A symbolic increase in the RBI rate would hurt the equities markets

<p>According to Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares & Stock Brokers, the Reserve Bank of India (RBI) may be forced to consider at least a symbolic rate rise in order to anchor inflationary expectations given the magnitude of the increase in food prices and other upside risks to inflation.<img decoding=”async” class=”alignnone wp-image-129258″ src=”https://www.theindiaprint.com/wp-content/uploads/2023/08/theindiaprint.com-a-symbolic-increase-in-the-rbi-rate-would-hurt-the-equities-markets-rbi-11zon-750×500.jpg” alt=”theindiaprint.com a symbolic increase in the rbi rate would hurt the equities markets rbi 11zon” width=”1394″ height=”929″ srcset=”https://www.theindiaprint.com/wp-content/uploads/2023/08/theindiaprint.com-a-symbolic-increase-in-the-rbi-rate-would-hurt-the-equities-markets-rbi-11zon-750×500.jpg 750w, https://www.theindiaprint.com/wp-content/uploads/2023/08/theindiaprint.com-a-symbolic-increase-in-the-rbi-rate-would-hurt-the-equities-markets-rbi-11zon-1024×683.jpg 1024w, https://www.theindiaprint.com/wp-content/uploads/2023/08/theindiaprint.com-a-symbolic-increase-in-the-rbi-rate-would-hurt-the-equities-markets-rbi-11zon-768×512.jpg 768w, https://www.theindiaprint.com/wp-content/uploads/2023/08/theindiaprint.com-a-symbolic-increase-in-the-rbi-rate-would-hurt-the-equities-markets-rbi-11zon-150×100.jpg 150w, https://www.theindiaprint.com/wp-content/uploads/2023/08/theindiaprint.com-a-symbolic-increase-in-the-rbi-rate-would-hurt-the-equities-markets-rbi-11zon.jpg 1200w” sizes=”(max-width: 1394px) 100vw, 1394px” title=”A symbolic increase in the RBI rate would hurt the equities markets 3″></p>
<p>This is especially plausible given that the RBI sees inflation as fundamentally a monetary issue that must be controlled by monetary policy, regardless of whether it is supply- or demand-sided.</p>
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<p>According to him, they have negative effects on the financial markets.</p>
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<p>With negative repercussions for the financial markets, particularly debt and equities, the rationale for a rate drop in the next year seems to have disappeared.</p>
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<p>Despite updating its inflation predictions, the RBI refrained from abruptly tightening monetary policy in August, believing that the rise in food prices was just temporary, according to Hajra.</p>
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<p>In addition to the significant food inflation, the sudden increase in grain and crude oil prices worldwide is a major worry. Although the inflation of edible oil is now quite low, the worldwide El Nino influence may alter the situation. The gradual easing of core inflation is a plus, he added.</p>
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<p>India saw the highest inflation rate in the previous 15 months in July, coming in at 7.4%. Food inflation increased by over 70% on an annualized basis, while fuel inflation increased by over 20%, leading to a rise in non-core inflation of over 50%. The year-over-year decline in gasoline prices and core inflation were the silver linings, he said.</p>
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<p>Food inflation increased dramatically from 4.7% in June to 10.6% in July. While tomato inflation of over 200% was a significant factor, many other fruit and vegetable commodities saw substantial inflation, mostly as a result of recent weather disruptions.</p>
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