MUMBAI: With growth improving in the second half of 2019 and pick-up in food inflation, RBI may have to shift back to tightening mode, Goldman Sachs said in a report. RBI may increase rates by 25 basis points each in Q4 of 2019 and Q1 of 2020, the research report said. It expects some pick-up in food inflation over the course of this year, as favourable base effects begin to wane and some momentum builds, as indicated by the most recent print on both consumer and wholesale prices, and given the weak winter crop so far, which could hit the markets around March-April.
“Going forward, as growth picks up, particularly in the second half of 2019, and if the US Fed increases rates and food inflation begins to pick up, the pressure on the RBI to shift back to tightening mode is likely to build,” it said. In the sixth bi-monthly monetary policy review, RBI reduced the repo rate by 25 basis point to 6.25 percent and changed the policy stance from ‘caliberated tightening’ to ‘neutral’. The central bank also cut its estimates on headline inflation, and expects the number to come at 2.8 per cent in
