Inflation likely picked up in February, but well below RBI target due to modest rise in food, fuel prices, finds survey

Bengaluru: Inflation likely accelerated in February but remained well below the central bank’s target, economists in a Reuters poll said, as only modest rises in food and fuel prices failed to drive a bigger lift from January’s 19-month low.

The poll of 37 economists, conducted  5-7 March, showed consumer price inflation, due to be released at 1200 GMT on 12 March, is expected to have picked up to 2.43 percent last month from January’s 2.05 percent.

An overwhelming majority of economists polled predicted inflation would average below 3 percent, with forecasts ranging from 2.15 percent to 3.20 percent.

If inflation comes in as expected, it would be below the Reserve Bank of India’s (RBI) medium-term target of 4 percent for the seventh month in a row and closer to the lower end of its 2-6 percent buffer range for a fourth month.

Inflation likely picked up in February, but well below RBI target due to modest rise in food, fuel prices, finds survey

Representational image. Reuters

“Headline CPI inflation will have remained low in February even if, as we suspect, it rose a touch due to higher food inflation,” noted Shilan Shah, senior India economist at Capital Economics.

Another low inflation reading would support the RBI’s surprisingly dovish turn early last month, when it cut interest rates and shifted its policy stance to “neutral” from “calibrated tightening”.

A Reuters poll of economists taken immediately after that decision showed another RBI rate cut expected before May’s general election.

But core inflation is expected to remain elevated with a separate Reuters polls showing oil prices rising and a potential trade conflict with the US weakening the Indian rupee, which would both be inflationary.

“Inflation is going to creep upward as we already see fuel prices pumping up following a lead from global oil prices which are going higher,” said Prakash Sakpal, Asia economist at ING.

“Plus, we have a weaker rupee - although INR has consolidated a bit since February - it is not totally out of the woods yet.”

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Updated Date: Mar 08, 2019 11:45:27 IST

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