BENGALURU- Indian retail inflation likely eased to 5.50 percent last month, within the Reserve Bank of India’s (RBI) tolerance band, on moderating food price rises and government subsidies that offset a surge in the cost of crude oil, a Reuters poll found.
The RBI kept monetary policy unchanged on Oct. 6 for a fourth consecutive meeting and signaled interest rates would remain high until inflation was closer to 4 percent , the midpoint of the central bank’s 2-6 percent target range.
Rises in food prices, which make up about half the consumer price index (CPI), continue to cool from recent peaks after the Indian government enacted a series of measures to boost supply.
Inflation, as measured by the annual change in the CPI was forecast to have fallen to 5.50 percent in September from 6.83 percent in August, according to an Oct. 3-9 Reuters poll of 66 economists.
Forecasts ranged between 5.10 percent and 6.90 percent , with over three-quarters of respondents predicting inflation to fall below the central bank’s upper end of the target range.
“Vegetable prices have corrected very sharply and not just for tomatoes, but for a host of other vegetables as well.
So more or less the vegetable price shock is receding,” said Dhiraj Nim, an economist at ANZ Research.
“Having said that, the persistent part of the food inflation problem remains there, which is cereals, pulses and spices, and I think the RBI can’t do much about it anyway.”
Rising crude oil prices are also likely to keep inflation elevated in the world’s third-largest oil importer. Oil prices rose around 3 percent on Monday to trade around $90 a barrel.
“Oil prices … are likely to remain high over the remainder of the year on global supply concerns,” said Alexandra Hermann at Oxford Economics.
Inflation was predicted to remain above 4 percent at least until the second quarter of 2025, averaging 5.5 percent this fiscal year and 4.8 percent next, a separate Reuters poll showed. Economists expect the RBI’s next move to be a cut in the second quarter of 2024.
India’s economy grew at its quickest pace in a year in the April-June quarter, buoyed by strong services activity and robust demand, but a drier than normal monsoon season could restrain future growth.
Gross domestic product (GDP) expanded 7.8 percent on an annual basis in the June quarter, accelerating from 6.1 percent growth recorded in the March quarter and topping a 7.7 percent forecast in a Reuters poll.
