RBI monetary policy: Hike as expected; next increase likely in 2019

July CPI print is likely to be below 4.5% and could even touch 4%, if food prices rise by 1% month-on-month, in line with previous month's trend

As expected, the RBI delivered a 25bps rate hike in the August policy, while maintaining a neutral monetary stance. RBI, in our view, has done the right thing by front loading rate hikes in June and August and can now be expected to remain in a wait and watch mode for a considerable period of time. We see the next 25bps rate hike happening only in April 2019 based on our forecast of inflation and growth. Only if the pressure on currency increases significantly in the coming months, then the RBI could be compelled to bring forward the rate hike