Indian inflation cools to one-year low, offers room for more rate cuts | Reuters

By Rajesh Kumar Singh | NEW DELHI NEW DELHI India's retail inflation cooled to a 13-month low in September, helped by moderating food prices, giving room for the central bank to cut interest rates again if needed.The consumer price index (CPI) rose 4.31 percent last month from a year earlier, its slowest pace since August 2015, government data showed on Thursday.Analysts polled by Reuters had expected the CPI to rise 4.80 percent, after a 5.05 percent gain in August.In a surprise move earlier this month, the Reserve Bank of India (RBI), under new Governor Urjit Patel, cut interest rates by 25 basis points to 6.25 percent on expectations that food inflation would ease in the months ahead.The latest prices data backed that assessment as annual food inflation sharply slowed to 3.88 percent in September from 5.91 percent a month ago.

Reuters October 13, 2016 22:00:07 IST
Indian inflation cools to one-year low, offers room for more rate cuts
| Reuters

Indian inflation cools to oneyear low offers room for more rate cuts
 Reuters

By Rajesh Kumar Singh
| NEW DELHI

NEW DELHI India's retail inflation cooled to a 13-month low in September, helped by moderating food prices, giving room for the central bank to cut interest rates again if needed.The consumer price index (CPI) rose 4.31 percent last month from a year earlier, its slowest pace since August 2015, government data showed on Thursday.Analysts polled by Reuters had expected the CPI to rise 4.80 percent, after a 5.05 percent gain in August.In a surprise move earlier this month, the Reserve Bank of India (RBI), under new Governor Urjit Patel, cut interest rates by 25 basis points to 6.25 percent on expectations that food inflation would ease in the months ahead.The latest prices data backed that assessment as annual food inflation sharply slowed to 3.88 percent in September from 5.91 percent a month ago.

With strong crop sowing on the back of good summer rains widely expected to keep a lid on food prices, and a benign outlook for global commodity prices, inflation is expected to remain in check."Until February we are going to see benign prints in CPI, which will open up space for at least one more rate cut in fiscal year 2016-17 under the present regime," said Rupa Rege Nitsure, group chief economist at L&T Finance Holdings.After this month's surprise rate cut, many economists revised their interest rate outlook and are now expecting the central bank to cut its key repo rate further by as much as 50 bps.

Bolstering the rate cut hopes is the decision of the RBI's recently formed monetary policy committee to relax the timeline for meeting its inflation target.The central bank now expects to hit its 4 percent inflation target by 2021 instead of 2018 as proposed earlier.

It also slashed the real interest rate target to 1.25 percent, from the 1.5-2 percent band set by Patel's predecessor Raghuram Rajan, giving itself more room to cut rates further.However, a pending increase in house rent allowance for millions of government employees and pensioners as well as a nationwide rollout of a new sales tax next year are expected to increase prices. Analysts at Nomura expect the rise in house rent allowance to add 100-150 bps to the headline inflation. Similarly, the implementation of a general sales tax from next April is likely to increase inflation by as much as 70 bps, they say. (Editing by Kim Coghill and Nick Macfie)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

also read

India records 19,740 new COVID-19 cases, 248 deaths; highest recovery rate reported since March 2020
India

India records 19,740 new COVID-19 cases, 248 deaths; highest recovery rate reported since March 2020

The country’s Friday’s numbers were 7.1 percent lesser than the previous days numbers

Facebook accused by whistleblower of focusing on profits instead of suppressing hate speech
News & Analysis

Facebook accused by whistleblower of focusing on profits instead of suppressing hate speech

Former Facebook employee Frances Haugen said the social media giant's products contributed to the Capitol riots in Washington, in January.

India must focus on public investment as economy recovers from pandemic, suggests IMF
World

India must focus on public investment as economy recovers from pandemic, suggests IMF

IMF's Fiscal Affairs Department Deputy Director Paolo Mauro advised that special attention must be given to green investment to ensure that recovery is inclusive and eco-friendly