India: Increase in headline inflation to bring an end to easing cycle – Capital Economics

In their latest client note, analysts at Capital Economics note that India’s headline retail inflation likely accelerated to a five-year high in December, which could prompt the policymakers to reconsider their easy monetary policy.

Key Quotes:

“Headline inflation is likely to have risen to its highest in five years. That would almost certainly be enough to bring the central bank’s easing cycle to an end.”

Fiscal loosening from the government in FY21 budget as recent anti-government protests will put pressure on policy makers to appease them through fiscal concessions.

The weakness of growth will add to pressure on the finance ministry to announce expansionary measures to support the economy.”