Perspective on CPI Data By Rajani Sinha, Chief Economist, CareEdge Ratings
Below The Perspective on CPI Data by Rajani Sinha, Chief Economist, CareEdge Ratings.
CPI inflation, broadly in line with the expectations, moderated to 4.83% in April. Core inflation persisted at a benign rate of 3.2%. Reversing last month's trend, food inflation inched up to 7.9% as the ongoing deflation in the oil and fat category fell to a single digit after 12 months. The high inflation in specific food categories, including vegetables and pulses, remain a concern. While the outlook for food inflation has brightened due to anticipations of a normal monsoon, the temporal and spatial distribution of monsoon would be critical factors.
Apart from elevated food inflation, incremental risk to inflation stems from the uptick in global commodity prices, especially industrial metals. Industrial metal prices are up ~20% in the past three months. This warrants closer attention as the rise in input prices can be passed on to the consumption basket.
For FY25, we expect inflation to average 4.8%. While core inflation has slipped below 4% target, high food inflation remains a concern. Going forward, if the food inflation moderates, we expect RBI to cut policy interest rate by a shallow 50 bps, in two tranches in the second half of the fiscal year.
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