Central banks worldwide have been raising interest rates frantically to curb inflation.

The Reserve Bank of India (RBI) is closer to its inflation target than other central banks, an analysis by Emkay Global Financial Services Ltd shows. The domestic brokerage noted that inflation, measured by India’s consumer price inflation (CPI), is about 100bps above the RBI’s 6% comfort zone ceiling. A basis point is 0.01%. India’s CPI, or headline retail inflation, came in at 7.01% in June, a slight slowdown from 7.04% in May.

However, inflation in the US and other advanced economies is well above central bank targets. Among emerging markets, Brazil faces a similar situation. According to Emkay Global, inflation in India is around 200bps above the current policy rate of 4.90%, while in the US, EU, UK and Australia, inflation is 400-800bps above the current policy rate.

The RBI has raised the repo rate by 90bps so far this year. While global commodity prices have slowed, analysts expect the RBI to keep raising interest rates until CPI inflation eases significantly.

Note that the global commodity index is down 23% from its April peak.

In a July 19 report, economists at IDFC First Bank said: “Slowing commodity prices, weaker global growth prospects and fewer supply chain disruptions raise the prospect of peaking commodity inflation. Having said that, crude oil prices are likely to remain volatile as potential supply-side disruptions balance weak demand”.

At its upcoming policy meeting in August, the RBI is expected to raise the repo rate by at least 25bps.

The IDFC First Bank report added: “We expect the RBI to continue to hike rates ahead of schedule, with CPI inflation expected to average 7% in H1FY23”. It added that apart from inflation, another factor in favour of an early rate hike is the pressure on the Fed to prevent further capital outflows and depreciation of the Indian rupee.