Perspective on August 2021 CPI Data by Mr. Nikhil Gupta, Motilal Oswal Financial Services Ltd
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Below is perspective on August 2021 CPI Data by Mr. Nikhil Gupta, Chief Economist at Motilal Oswal Financial Services Ltd.
“Aug'21 headline CPI-inflation at four-month low of 5.3%, much lower than the consensus
As against the Bloomberg consensus (and our exp) of 5.6%, headline inflation came in at four-month low of 5.3% YoY in Aug'21.
Details confirm that 'Vegetables' was the primary driver of lower headline CPI. Food inflation was just 3.1% YoY last month, vis-a-vis our forecast of 3.8%.
Core inflation also came in at four-month low of 5.9% YoY in Aug'21, v/s our forecast of 6% (same as that in Jul'21). Lower inflation in 'personal goods & services' drove lower core inflation.
Overall, as we had mentioned earlier also, we don't see higher inflation in early CY21 as a threat to the economic stability. Several one-off factors and CPI methodology contributed to higher inflation during lockdowns. As economy opens up, the headline inflation eases.
We continue to believe that inflation will ease further towards 4.2-4.3% in Oct-Nov'21. Cut in fuel taxes around Diwali (we consider it as highly likely scenario) may support lower inflation. Therefore, we don't expect RBI to hike rates in FY22.”
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