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Retail inflation likely to ease, fall to five-month low in September

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Oil price rose over 7.5 percent last month and is expected to be costlier

The country’s retail inflation probably eased again in September, falling to a five-month low, thanks to a favorable comparison to the previous year and lower food prices driving down increases in crude oil and fuel costs. , a Reuters survey found.

The median of the October 5-7 survey of 37 economists estimated that consumer price inflation fell sharply to 4.5 per cent in September, from 5.3 per cent in August. This will mark the third consecutive month within the Reserve Bank of India’s (RBI) tolerance band of 2 per cent-6 per cent

Forecasts for the data, scheduled for release on October 12 at 1200 GMT, ranged between 4.25 percent and 5.50 percent, with only a few forecasts above five percent.

The easing of price pressure will provide policy room to the RBI, which is widely expected to keep the key repo rate at 4 per cent at the conclusion of its monetary policy meeting on Friday, as it looks to boost economic growth.

Senior Economist Sakshi Gupta said, “Despite improved fuel and core inflation, lower than earlier food momentum and higher base from last year restrained the headline print. Inflation prints may bring some positive surprises in the coming months.” In HDFC Bank.

But with the economy picking up, the pressure on prices was expected to resume.

“From December onwards, once the base effect subsides and purchasing power in the system improves, CPI inflation will again exceed five per cent,” said HDFC’s Gupta. Adding to the base effect alone, September inflation is likely a full percentage point.

However, economists noted that food inflation, which is usually the driver of overall inflation at this time of year, was more subdued.

“This monsoon season has not seen the usual seasonal increase in vegetable prices, which apart from the higher base is largely attributable to benign food inflation,” said Teresa John, an economist at Nirmal Bang.

“However, prices of pulses, oil and fats and sugar have increased on a sequential basis.”

Economists widely expect the RBI to lower its inflation projections, but Brent crude has hit a multi-year high.

Oil prices rose more than 7.5 percent last month and are projected to get costlier as demand for the fuel improves.

The latest Reuters poll also estimated that India’s industrial output grew 12 percent in August, compared to 11.5 percent in July.

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