October 2022 CPI inflation in-line with market consensus Says Mr. Nikhil Gupta, MOFSL group
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Below Perspective on September CPI and August IIP Data by Mr. Nikhil Gupta, Chief Economist, MOFSL group
India's headline inflation reduced to three-month low of 6.8% YoY in Oct’22, in-line with market consensus but lower than our forecast of 7%. The deviation came from vegetables (within food). It reduced to eight-month low of 7.8% YoY in Oct’22 (v/s our forecast of 12.8% YoY).
As expected, lower inflation was led by food items. Food inflation inched lower to 7% YoY in Oct’22 (v/s 7.8% YoY in 1HFY23), while core inflation remained sticky at 6.2% YoY last month (v/s 6.3% YoY in Sep’22).
Earlier today, WPI inflation came in at 8.4% YoY in Oct’22 – a 19-month low. This was also on-line with market expectation (of 8.5% YoY). This too was led by lower food inflation.
Overall, an inflation of 6.8% is nothing to cheer about. If 2QFY23 real GDP growth comes in stronger-than-expected (which is what we expect), the RBI may go for another 50bpa rate hike next month, though 35bps is still the consensus. In any case, we continue to believe that the terminal repo rate could be 6.5-6.75% by the end of FY23, followed by a long pause in FY24.
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