ICRA comments on CPI data


ICRA comments on CPI data

Aditi Nayar, Sr. Economist, ICRA

CPI inflation has printed mildly higher than our expectation of 3.5% on account of a stronger than anticipated uptick in the known concern areas of pulses and vegetables. Nevertheless, the subdued extent of the pickup in food inflation in August 2015 relative to the previous month despite the considerable worsening of monsoon dynamics, as well as the drop in core CPI inflation, are encouraging.

Post the waning of the favourable base effect from September 2015, we expect CPI inflation to print in the range of 4.0-5.5% during the remainder of FY 15-16 and undershoot the Central Bank’s projection for January 2016 by a considerable margin.

Although the extent of global volatility post the Federal Reserve Bank’s rate decision later this week remains critical, today’s CPI data lends support to the expectation of a Repo rate cut in the RBI’s upcoming policy review.


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