“As we now expect inflation to track at 6 per cent in QE December23, we delay the start of the easing cycle to 2Q24 from 1Q24. We maintain our expectation of two rate cuts of 25bps each.

“Further, in the near term we expect RBI will maintain its focus on liquidity management to ensure liquidity remains close to neutral and the interbank weighted average call rate remains at or a tad above the repo rate," the report said.

“We estimate inflation will track above 7 per cent in August and revert to around 6.5-7 per cent in September and October. We expect inflation to average 7.3 per cent in QE September23 and 6 per cent in QE December23. We build in food price disinflation as supply disruptions ease, and thus we expect inflation to moderate to below 6 per cent from November. We increase our F24 inflation estimate to 5.7 per cent from our earlier expectation of 5.4 per cent. We expect core inflation to remain steady at 5-5.2 per cent,” it added.

Headline inflation for July rose to a 15-month high of 7.4 per cent, surprising expectations of 6.4 per cent. This was driven by food inflation (mainly vegetable prices), even as core inflation moderated a tad to 5 per cent.

Indeed, CPI ex vegetables was largely steady at 5.4 per cent in July vs. 5.2 per cent in June.