August CPI eases to 7.8%: Experts say RBI headed for prolonged pause

Mumbai: India’s annual consumer price inflation eased to 7.80 percent in August, data showed on Friday, helped mainly by slower annual increases in prices of fuel, light and clothes.

The data was in line with a Reuters poll forecast and lower than July’s 7.96 percent print.

SONAL VARMA, ECONOMIST, NOMURA, MUMBAI

“(CPI) is moving in the right direction, i.e., towards disinflation. The rates are still on a prolonged pause for now to ensure that disinflation continues even as growth starts to recover.

“We see some pick up in CPI between December and March, but tracking below the RBI’s target of 8 percent.”

RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI

“Combined figures of IIP and CPI inflation suggest that RBI is headed for a prolonged pause on interest rates.

However, weak domestic demand and dovishness of central banks across the globe may not prompt the RBI to raise policy rates despite the structurally high food inflation.”

A. PRASANNA, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP, MUMBAI

“Overall, the food inflation is a bit on the higher side compared with our expectations, but going forward the base effect looks favourable and looks like the vegetable prices have also peaked off.

“Headline inflation should trend lower. But in the fourth quarter, the headline inflation will start going up again, and should average close to 8 percent, in line with the RBI’s target.

“We still don’t have visibility on the 6 percent target of 2016. Unless there are some structural improvements on the food inflation front, we don’t foresee any scope of rate cuts in the next 12 months.”

SHUBHADA RAO, CHIEF ECONOMIST, YES BANK, MUMBAI

“The CPI numbers have been almost in line with expectations. The biggest positive in the CPI is core at 6.89 percent yoy.

“It is the first reading in series below 7 percent. With declining global commodity prices and a stable rupee, the core inflation is likely to see a decline as this may offset some demand led pressures on prices.

“The early indications also show food prices in September getting reined in. Overall, CPI is expected to trend lower on these two counts.

“On IIP, mining has been a mild negative number, while electricity and manufacturing are in line.

“Going forward, we need to watch for coal/electricity related issues for IIP projections. We are yet to see meaningful and a sustained pick up in capital goods - a barometer for investment. We maintain our 3.7 percent on IIP for FY15. Second-half recovery will be crucial for this assumption”.

UPASNA BHARDWAJ, ECONOMIST, ING VYSYA BANK, MUMBAI

“The outlook on inflation seems less discomforting than it was a month back. Recent development on monsoons and sliding oil prices bode well for the inflation trajectory in the subsequent months.

We continue to expect that RBI will keep its policy rate unchanged through FY15 with a probable action mid next year.”

Reuters