Rate rise cycle at its peak: Reserve Bank of India

MUMBAI: Stating that the January headline inflation at 6.55 per cent is in line with its expectations, Reserve Bank deputy governor Subir Gokarn today said the data underline that the rate hike cycle is at its peak.

"It (headline inflation) is in our trajectory...till it matches our projection, it reinforces our belief that rate cycle has peaked," Gokarn told reporters on the sidelines of an event here.

Gokarn, who is incharge of monetary policy at Mint Road, added that in RBI's view, inflation is "trending down from the highs of nine per cent plus to something closer to seven per cent."

The data released earlier today said overall inflation has fallen to the 26-month low of 6.55 per cent courtesy a deflation in the food basket.

The apex bank, which ushered in a series of 13 consecutive hikes over a 19-month period till December last year to tame the uncomfortably high inflation, has put a year-end target of headline inflation at 6 per cent.

However, in its monetary policy announcement on January 24--where it cut the cash reserve ratio but kept its overnight lending rate unchanged--the RBI articulated a shift in focus from inflation to growth in its monetary stance.

Gokarn flagged jump in oil prices and the possibility of food inflation going back into positive territory as the future potential difficulties.

The non-food manufacturing inflation, which stood at 6.49 per cent year-on-year, is also broadly in line with RBI projection, Gokarn said.

In its last policy review, the RBI had cut CRR or the per centage of deposits banks have to park with RBI, by 0.50 per cent due to pressure on liquidity while analysts are expecting it to cut its policy rate at March or April review.

When asked about the possibility of another CRR cut as the liquidity continues to be beyond the comfort zone with banks drawing almost Rs 1 lakh crore through the overnight window, Gokarn evaded direct reply.