The Reserve Bank is likely to change its monetary policy stance and raise rates from the first quarter of 2022, a Japanese brokerage said on Monday.
The central bank will begin this month with liquidity normalization measures, narrowing the difference between the rate at which it funds the system and the rate at which it absorbs excess liquidity in December, Nomura said.
It may be noted that the latest move taken last week by the Reserve Bank of India (RBI) to reduce excess liquidity in the system through stated targets is seen by some as policy normalization, which has been very accommodating from the start. of the pandemic to stimulate growth.
The brokerage raised its consumer price index (CPI) inflation target for 2022 to 5.2% from 5% earlier.
Demand remains strong in India, but there are supply-side headwinds in areas like chips that are troubling the auto sector and coal shortages that threaten to plunge parts of the country into darkness, a he declared.
The country is reporting coal shortages and power companies are facing the prospect of importing coal at significant cost.
With electricity demand likely to rise amid continued economic normalization and upcoming festive sales, supply disruptions pose a significant near-term downside risk to growth momentum, it said. he warned.
For the week ended last Sunday, its Business Resumption Index rose to 105.1 from 103.4 the previous week.
“If power outages become widespread, industrial production could suffer in the near term, while rising energy costs could squeeze corporate margins and contribute to consumer price inflation,” the agency said. brokerage in the report.
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