Home / Newsroom / The Central Bank is likely to pause its rate hike cycle in February – Dun & Bradstreet India

The Central Bank is likely to pause its rate hike cycle in February – Dun & Bradstreet India

Mumbai, January 23rd, 2023

Key economic forecast:

Real Economy: Dun & Bradstreet India expects industrial production to have declined in December 2022 as the domestic festive driven demand wanes and exports continue to weaken amidst slowing global trade. Dun & Bradstreet expects the Index of Industrial Production (IIP) to have grown by (-1.0%) - (-0.5%) during December 2022.

Price Scenario: Even though both wholesale and retail inflation continue to ease, the sticky nature of core inflation warrants cautiousness. Core inflation now hovers around double-digit levels rising to the highest level since January 2012, since the data is available. Dun & Bradstreet expects both wholesale and retail inflation to ease further before picking up, albeit moderately, when the impact of the low food prices from the fresh arrivals in winter fades away. Dun & Bradstreet expects Consumer Price Inflation (CPI) to be in the range of 5.6% - 5.8% and Wholesale Price Inflation (WPI) to be around 4.3% - 4.5%, respectively in January 2023.

Money & Finance: The broadly stable oil prices, fall in US Treasury yields, slowdown in US inflation rate, and easing of overall inflationary pressures, barring the core inflation, has raised hopes that the Central Bank is coming close to a pause in its policy tightening cycle. This is positive for the bond market as the yield curve appears to have flattened by December 2022. Nonetheless, uncertainty amongst foreign investors in the debt market will continue to exert upward pressure on yields. As liquidity progressively tightens, the short end of the curve will remain high. On the other end, the government’s market borrowing target to be announced in the upcoming Union Budget will impact the 10-year yield. Dun & Bradstreet expects the 15-91-day Treasury Bills yield to remain at around 6.4% -6.5% and 10-year G-Sec yield to be 7.4% -7.45% for January 2023

External Sector: Better-than-expected inflation data for US is likely to provide a short-term reprieve for the rupee versus the dollar. The likelihood of the Federal Reserve slowing down on its rate hikes is prompting investors to swap the dollar for riskier asset classes supporting the rupee. It is to be noted that although the return of foreign portfolio investors to the equity market bodes well for the rupee, the support might be temporary. Domestically, a lower-than-expected inflation and reduced pressures on imported inflation as global commodity prices cool-off will help rupee to gain some strength. Dun & Bradstreet expects the rupee to appreciate to 81.9 per US$ during January 2023.

Dr. Arun Singh, Global Chief Economist, Dun & Bradstreet said, “The high and sticky core retail inflation raises concerns even as the headline inflation eases below the Central Bank’s target. The US Federal Reserve is yet to indicate the end of its policy tightening cycle, and this will weigh upon the Central Bank’s decision on policy rate when it meets in February 2023.  We expect that the central bank might pause its rate hike cycle in its February meeting and assess the impact of previous rate hikes. Even as India’s growth remained resilient so far, the weakening of external demand that supported its growth momentum during the first half of the current fiscal year is likely to wane. Domestic demand too might remain lukewarm. Dun and Bradstreet’s pan India survey shows that optimism amongst businesses for volume of sales, a proxy for demand, in Q1 2023 has fallen to its lowest level since Q3 2021”.

Dun & Bradstreet’s Economy Observer Forecast



Latest Period

Previous period

IIP Growth

(-1.0) % - (-0.5) % Dec-22

7.1% Nov-22

-4.0% Oct-22

Inflation WPI

4.3% - 4.5% Jan-23

4.95% Dec-22

5.85% Nov-22

CPI (Combined)

5.6% - 5.8% Jan-23

5.72% Dec-22

5.68% Nov-22

Exchange Rate (INR/US$)

81.9 Jan-23

82.46 Dec-22

81.81 Nov-22

15-91 day's T-Bills

6.4% - 6.5% Jan-23

6.39% Dec-22

6.46% Nov-22

10 year G-Sec yield

7.4% - 7.45% Jan-23

7.31% Dec-22

7.36% Nov-22

Bank Credit

14.5% - 15.0% Jan-23

12.9% Dec-22

15.61% Nov-22




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