Consumer Price Index (CPI) numbers today: What will be India's latest inflation data? Good news awaits Shaktikanta Das?
If this month CPI eases further, it will give relief to RBI, which can either decide to stick with the status quo or, as the NDA government wants, announce an interest rate cut in the upcoming policy.
The Central Statistics Office (CFO) will be presenting the Consumer Price Index (CPI) or retail inflation data for the month of November 2018. Every eye will on the latest CPI inflation numbers, as that is what will be taken into account for monetary policy-making in February, 2018 under new Reserve Bank of India (RBI) governor Shaktikanta Das. The former civil servant, also a member of the 15th Finance Commission, Das has been appointed as a successor to Urjit Patel who shockingly, resigned one day ago from his post in RBI. It needs to be noted that, RBI is an inflation trajectory central bank and every policy decision making revolves around the performance of CPI. If this month CPI eases further, it will give relief to RBI, which can either decide to stick with the status quo or, as the NDA government wants, announce an interest rate cut in the upcoming policy.
CPI in October month eased to 3.31% compared to 3.7% in previous month and 3.6% a year ago. Sequentially, inflation declined by 47bps vs. an increase of 8bps last month. Food inflation continued to decline largely led by sharp contraction in pulses, vegetables and fruits, fuel inflation continued to rise, tracking international oil prices. Miscellaneous ‐ Health, Household requisites and Personal care fairly ahead of our expectations.
During December 2018 policy, RBI under Patel's reign decided to maintain status quo in policy repo rate at 6.50% for second time in row. Interestingly, the central bank trimmed down its CPI inflation forecast.
RBI inflation is projected at 2.7-3.2 per cent in H2:2018-19 and 3.8-4.2 per cent in H1:2019-20, with risks tilted to the upside.
CPI November 2018!
Teresa John, Research Analysts at Nirmal Bang said, "CPI inflation in November 2018 is likely to come in at 2.26% YoY, down from 3.3% in the previous month. Sustained food deflation and lower fuel prices are likely to be primarily responsible for the decline in inflation, apart from a higher base. Food and beverage inflation is expected to decline 2.1% YoY, after a 0.14% fall in the previous month."
John explains, the decline in food prices is likely to be led by vegetables. Prices of potatoes and onions have declined by over 10% MoM. Prices of fruits, sugar, pulses, oilseeds and milk products are also expected to remain soft.
Further, the fuel and light segment will continue to witness an uptick on account of higher LPG prices. Core inflation (including petrol and diesel) is expected to soften slightly to 5.92%YoY, from 6.2% earlier, helped by the decline in petrol and diesel prices.
John added, "CPI inflation is expected to average 3.7% in FY19 and 3.9% in FY20."
With inflation likely to be below or hovering around the Reserve Bank of India or RBI’s 4% target,John says, "we expect accommodation by the RBI by way of rate cuts by 1HFY20."